Trading Volatility with Candles

[TinGull 10]

We all know the VIX, RVX, VXN and all the volatility indicators to watch...but did you know that you can trade options on them? If trading vol is a bit too esoteric for some, you can always trade any major market. If watching the VIX, trade the s&p's.

 

For instance....

 

I went short a put spread into the close last night on SPY because of two things...one, we built a phase 1 after 2 days of down action, so an upmove was called for to relieve some exhaustion. And to put the icing on the cake, we had this chart:

 

 

Any candle chartist will tell you...GO SHORT this chart! A doji at a solid resistance area.

 

Well, when the VIX goes down, price goes up. By going short a put vertical I was in essence buying the SPY with limited downside (limited upside potential, too) to worry about. So far, so good.

[brownsfan019 17]

Interesting chart Tin, thanks for sharing.

 

Keep us posted on this trade as I am curious how these option plays operate. If you feel like divulging entry level, profit target, etc.

[TinGull 10]

http://www.traderslaboratory.com/forums/110/my-trade-ideas-2619-2.html#post22003

 

This is what I did with my SPY options on this kind of play. i didn't do anything with the vix options. profit target...basically want SPY to remain above 150. I figured 1500 would be a level that bulls would defend on SPX and it gives me a nice bit of cushion for the next 30 days. Good chance of working out, too, based on the volatility.