VIX Follow-Up

Plus: Close CMG

By Bryan Bottarelli
Monday, March 02, 2009 3:52 PM EST
Mon, 2 Mar 2009 20:52:00 GMT

Dear Bottarelli Research Member,

Folks, we have a bloodbath on our hands.

To follow up on the chart of the CBOE Volatility Index (which I highlighted earlier this morning), we still have a long way to go. As you can see below, the VIX has certainly spiked up today, but considering it’s still well off the 80 highs set last November, it’s easy to see that this market is not nearly as fearful as it was four months ago. For this very reason, we’ll maintain a bearish bias.

VIX

As the selling pressure intensifies going into the close, there’s no way we can maintain any upside positions. As a result, our CMG April 60 Calls (CMG DL) have triggered their stop loss prices, and should be closed. Sell.

This leaves us holding the PRU March 15 Puts (PRU OZ), JPM March 20 Puts (JSA OD), and TBT April 48 Calls (TBT DV). And aside from that, let’s sit tight.

We’re in a very dangerous position right now, so let’s be smart with our trading. We’ll carefully add downside positions when the timing is right — but at the same time, we won’t over-trade this market. If we’re about to see a panic sell-off, I may add some new downside positions. But at the same time, we’ll respect the ability for a quick upside reversal. Either way, we’ll know more going into tomorrow, and I’ll be here to guide you through it every step of the way. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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