2012 has started on a positive note, but investors continued to monitor issues related to the European debt crisis and have not fully decoupled the US markets from European bourses. During this period yields on Europe have remained relatively high and the VIX volatility index has remained stabled.
The VIX, which monitors the “at the money” strike implied volatility of the S&P 500 Index, has remained above the 20% level, despite testing it twice in the past months. The VIX is trading below the 200-day moving average near 26%, and the 50-day moving average is coming close to crossing below this long term level, which would provide additional downward momentum.
The RSI (relative strength index) is below 40, which reflects negative momentum but not an oversold level. The MACD is hovering around the zero level, which shows that both the 12 and 26 day moving averages are on top of each other.
A break below the 20% level will likely create further momentum as the VIX tests the 17.5% levels see last in August before the European crisis reemerged.
The Trade – Purchase a daily binary option put on the VIX on a daily close below 20%.
Signal Summary
Asset : VIX
The trade : Binary Put Option
Expiry time : End of day
When : On a daily close below 20%.
Result : Option expired in the money
