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Short Term Market Timing Using The VIX

Short Term Market Timing Using The VIX. What is the VIX?.

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Short Term Market Timing Using The VIX

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  1. Short TermMarket TimingUsing TheVIX

  2. What is the VIX?

  3. What Does VIX - CBOE Volatility Index Mean?The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge".There are three variations of volatility indexes: the VIX tracks the S&P 500, the VXN tracks the Nasdaq 100 and the VXD tracks the Dow Jones Industrial Average.

  4. The VIX measuresVolatility.

  5. What is Volatility?Volatility is the rate at which the price of a certain [security] moves. A security with high volatility has bigger fluctuations in price compared to a security with low volatility. The more quickly a price changes up and down, the more volatile it is. As such, volatility is often used as a measure of risk.

  6. The VIX measures the cost ofbuying put options on indexes.

  7. The VIX moves inverselyto the direction ofthe stock market.

  8. VIX Top = Market BottomVIX Bottom = Market TopVIX going up = Market DownVIX going down = Market Up

  9. Daily Charts

  10. VIX – 10 minuteIntra Day chartfrom 3/2/11

  11. Let’s look at theDIA Intra Day

  12. 3/2 bought DIA $120 Call for $1.733/3 sold DIA $120 Call for $2.88Profit= $1.151.15 / 1.73 = 66% returnin one Day

  13. Once resistance is violated, lookfor it to act as support!Once support is violated, lookfor it to act as resistance!

  14. Go forth & Prosper!

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