Fade the Echo Volatility Spike
VIX currently at 18.06, +29% for the day.
Looks like some echo volatility and another opportunity to fade the spike.
Tuesday, March 13, 2007
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2 comments:
Are you saying this echo volatility is normal, and therefore should be bought, rather than sold? I've read your articles, and love the content...I'm trying to wrap my mind around what it means.
Hi woodshedder,
I guess I was a little vague in some of my posts on echo volatility, but the bottom line is that 1-2 echo volatility spikes in the 20 trading days following the first spike should be considered 'normal' and an opportunity to fade that spike.
If, after 20 trading days (on March 28), we are still seeing significant volatility spikes and/or volatility is above the Feb 27 levels (when we had an intra-day high of 19.01), I would conclude that we are likely entering a period of increased volatility rather than just seeing an occasional volatility spike and a return to lower volatility levels.
The theory, of course, is far from being 100% accurate, but that is essentially what it says. I hope this helps.
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