Risk Rising as VIX Approaches Teens - Voice of the People


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Zacks highlights commentary from People and Picks Member «JediStockMaster».

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Risk Rising as VIX Approaches Teens

The VIX has long been paralleled as a contrarian indicator relative to the various market main index benchmarks such as the DOW and S&P 500.

The fact that the VIX has been falling for 3 straight months and denying this bullish environment is an understatement. A VIX under the key level of 25 and under 20 gives rise to a complacent investor sentiment. As we all know the market can stay exuberant longer than we can have a bankroll.

With the VIX sitting at 18 and testing the lower area of 17 as a key level, market risks however are rising substantially the further the market rallies up to the old May and July 2011 respective high's.

There is a possibility the VIX can go as low as 15, which was prior key support multiple times for the VIX during multiple months of 2011.

A reading of 15 and slightly above that support, would give players an opportunity to purchase Put protection on their long positions. Which would be a cheap viable option once the VIX reaches near those levels. Call options relative to Put options at this point in time are reaching all time high's, indicating risk is certainly paramount as the market continues to churn higher. Purchasing Puts to protect ones longs or going all out Put options only for downside plays when the VIX nears the 15 support level would provide players and investors the best insurance against a sudden catastrophic decline in market values this year.

The market currently projects a long term cycle topping sometime later this year, with potential for the market to churn sentiment into the ground before and when an actual decline occurs. Positioning your portfolio before this occurs would be a smart and savvy way to protect yourself in this market environment.

Stay long but nimble, as risk on - risk off sentiment weighs on the markets. Keep the Powder dry, and as always, a little insurance never hurts.

Cheers and good Trading & Investing from your P&P Market Analyst,


The most recent picks by «JediStockMaster» are:
A buy rating on EnCana Corp. ( ECA ),
a buy rating on Discover Financial Services ( DFS ) and
a buy rating on American Express ( AXP ).

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AMER EXPRESS CO ( AXP ): Free Stock Analysis Report
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ENCANA CORP ( ECA ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks
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