After completing my daily routine of updating the short-term oversold/overbought list of highly-liquid ETFs for the High-Probability, Mean-Reversion indicator I can’t help, but to be excited for the days ahead. Of course, I’m talking short-term, but I think this extends through the November and December expiration cycles as well for those of us who like to sell options.
But if you like to play the directional game, which I do once in a while, you can’t ask for a better time. Indeed, the God of Probability is smiling right now.
Just look at all of the short-term extremes in the market right now. Take your pic. The fact, that all but volatility is in a short-term extremes tells us a mean-reversion is likely. Historically, when we see all of the ETFs I follow move into extremes it’s time to get serious.
Several days ago I added a few positions for my subscribers, one of them being a full-on directional play in XOP. Typically, I would have just wrapped an iron condor around the ETF or more likely a bear call spread , but XOP was in a VERY OVERBOUGHT state. So far, so good.
But while XOP has moved lower from a “very overbought” state, the market has pushed higher. And as you can clearly see from the table below, every other ETF has done the same.
So if you truly believe in the power of mean-reversion, now is the ideal situation to take advantage.
If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.