Grab Your Life Vests; Choppy Markets the Next Two Weeks

January 9, 2015
By Vlad Karpel

I would chalk a lot of the upside trade in the S&P 500 ($SPX) to some good old fashioned short covering. While the EU ($EZU) was able to gather some upside steam, I really did not see the type of volume that would signal newcomers at these price levels.

The Seasonality Chart is a good predictor for some choppy action, with the S&P 500 battling around $2050 and $2080. A break of $2080 in the S&P would be an attractive level for new entrants. Keep that in mind if momentum does pick up in the next few sessions.

I will look to add some volatility exposure back into my portfolio if the $VIX dips below $16. If  implied volatility rank of those names starts to get into the 75-100 percent range, it would be a good opportunity to write some calls against any longs in my portfolio . To determine the rank, take the 52 week low of implied volatility and subtract the current implied volatility, then divide that product by the 52 week low. A great local source for volatility data comes from our friends at

To give you an example, if the current implied volatility is 50 percent and the 52 week low is 25 percent, that is telling me that implied volatility percent rank is 100 percent, since the current implied volatiity has doubled.

This is a good gauge to stay on my toes and to mitigate and/or take advantage of this volatility spike. Have a great trading day and see you next time at the corner!

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