Tuesday 29 May 2018

Time to buy VIX? (1)

What's happening on US stock markets can be described as extremely dynamic and dramatic. But, as they say, we've already seen something like that before. Two times. And just before a drastic drop in US indices by more than 40 percent. Yes, I recall 2000 and 2007.
And while it does not necessarily have to end the same way - with crisis and crash (although it is possible, given that it has already passed 10 years since the last crisis), at least we can enter the "bearish cycle" - that is, a decrease in indices of more than 20%.


How?

The scenarios of the events in above mentioned two years, and then witnessing a fall in the index of more than 40%, seemed this way:
Reporting a historical record => Correction between 8 and 13% for about four weeks => Upward test for the next three or four months => Unsuccessful breakthrough or minimal false break at the top => Direction down to test the lowest value of the correction => And finally break down when breakthrough at the stated lowest value. Does it seem familiar to you?
If you think that a similar scenario can be formed at the moment, you can trade it with the VIX.
And the moment of his purchase is "ripening" again. Because the volatility index is again starting to look like an "asymmetric investment" - one with a limited drop potential and unlimited growth.


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