Can You Smell What the VIX Has Cooking? Time To Buy Puts?

Discussion in 'Trading' started by ByLoSellHi, May 8, 2007.

  1. Even if you're long, it may be time to consider insurance.

    http://usmarket.seekingalpha.com/article/34941

    Caution Light on Markets: VIX Rising

    Posted on May 8th, 2007

    Larry MacDonald submits:
    Is it time to buy put options on the market indexes or inverse exchange traded funds? Maybe so: with stocks having gone on a tear and now looking overbought, perhaps it's time for some portfolio insurance. A choppy patch could be in store, a correction that gives this bull market time to rest.

    Some of the signs of overheating:

    • a CNNMoney.com article notes that 24 of the past 27 days have been up for S&P 500 index, tying a record not seen since 1927.

    • insiders are unloading into the rally (as noted in an earlier post)

    • the VIX measure of volatility is not going down – it is edging up

    • the spread between corporate and government bonds is edging up

    VIX 1-yr. chart:
    [​IMG]