Take VIX Profits!

Lock in Another Quick Gainer

By Bryan Bottarelli
Tuesday, July 01, 2008 10:00 AM EDT
Tue, 1 Jul 2008 14:00:00 GMT

PLAY: Sell your VIX July 25 Calls (VIX GE) at or above $2.00, good for the day.

Dear Bottarelli Research Member,

In the month of June, the Dow, NASDAQ, and the S&P 500 respectively fell -10.4%,-9.1%, and -8.6%. In short, it was brutal. These monthly losses have now dropped the three major market indices down -14.4%, -13.6%, and -12.9% respectively. Once again, brutal.

How do you play this volatility? Well, luckily for options traders like us, we have the ability to play options on the CBOE Volatility Index (VIX). To be honest, this is probably something I will do a lot more often if the wild price swings continue. After all, just look at today’s action in our VIX July 25 Calls (VIX GE). We entered these calls for $1.75, and as the Dow dropped over 100 points right at the open, these calls jumped up to a high of $2.20. That’s a nice little 25% gainer off the market volatility. While I feel like the VIX can continue increasing, we need to be nimble in this market and lock in profits wherever we can. Therefore, let’s take out VIX profits off the table now — and we can always re-enter calls at another time.

VIX

PLAY: Sell your VIX July 25 Calls (VIX GE) at or above $2.00, good for the day.

Congrats on two quick downside-market winners. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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