A surge in the VIX

Volatility has picked up at an alarming rate. On Feb. 22 the VIX hit 10.01 and today it had a high of 20.41. A 100% gain in just seven trading days. The market hasn’t seen a surge in volatility like that in years. Is this the beginning of a seller’s market. Option sellers have had a rough go at it over the past few years as premium has hovered around historical lows. Now that premium is once again an item we could see a surge in option selling strategies among many option-savy traders.

The sharp sell-off has pushed our oversold measures into near extreme levels. I would like to see a move lower, possibly a wash out, before I considering a position. Our shortest-term oversold measures are signaling that a short-term bounce could occur over the next few days and it certainly wouldn’t surprise me to see that type of price action, although I am not so confident in the sustainability of the move. I would only consider a short-term position at this juncture. As exciting as this market currently is, I never want to expose myself to uncertainty so I would ahve to have an ideal set-up to consider taking a position.

and we will do our best to save you a spot once we make the portfolio live, which will occur after the March expiration cycle.

Overbought/Oversold levels for March 5, 2007

• SPY - 14.4 (very oversold)
• DIA - 14.4 (very oversold)
• IWM - 12.7 (very oversold)
• QQQQ - 13.8 (very oversold)
• OIH - 25.4 (oversold)
• GLD - 23.3 (oversold)

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