Advanced Options

For the S&P 500 Index, last week's story was a combination of resistance at the 200-day Moving Average making it unusually sensitive to any negative fundamental news and that arrived Thursday on a report of declining German exports, resulting in a revised lower Eurozone growth forecast. The combination created a gap lower opening that ended the short-term uptrend from the December 26 low, thereby increasing the chances for a meaningful retest of the low. Accordingly, a detailed collar suggestion for SPY using Advanced Options data follows a short market review.

S&P 500 Index (SPX ) 2707.88 added 1.35 points or +.05% last week, including Friday's reversal day closing 1.83 points or +.07% higher. Last week could have been labeled "Target 200" as resistance at the 200-day Moving Average became an ideal place for profit taking. Now look for support from the operative downward sloping trendline from the October 3 high around 2650.

CBOE Volatility Index® (VIX) 15.72 6 declined .42 points or -2.60% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, declined .25 points or -1.89% ending at 12.99, below the bottom of the recent range shown in the one-year volatility chart and the SPX line chart.


VIX Futures Premium

The chart below shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts.

The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month future converges with the VIX at expiration. Previously, declines below 10 % and advances above 30% were unsustainable, but for the last year premiums above 10% have been scarce. If there was only one indicator available, this one would be a top contender.

With 2 trading days until February expiration, the day-weighted premium between February and March allocated 10% to February and 90% to March for an 8.26% premium vs. 7.54% the previous week ending February 1. Well below the bottom of the green zone between 10% to 20%, it continues suggesting cautionary positioning unconvinced the SPX advance will continue without an attempt to retest the December lows that may have just begun.

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For daily updates, follow our end-of-day volume weighted premium version located about half-way down the home page in the Options Data ...

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