Trading Volatility

on 05 13, 2010

The CBOE Volatility Index jumped to over 40 last week with the drop in market. I have been a buyer for many months. I never predicted a 1,000 point drop, but it is very clear to see that if the market started to fade anywhere near support the VIX jumped. Once we started to fall below critical levels on Tuesday and Wednesday, the VIX popped above resistance.
VIX
The resistance on the VIX chart was easy to spot, but that resistance could not hold down the fear from the 1,000 drop. In the video below we talk about what is volatility and some ways to trade it, and we walk through an example with last week’s Implied Volatility (IV) spike.

Watch the Video Below
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