While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
The VIX today has peaked at 19.20 and sold off and is around 17.42 as I write this.
As a result, the S & P 500 hit a low today of 2,044.02 and has rallied back to around the 2,063 level.
If this level can hold, it will help to confirm that a bottom is perhaps in.
As I have mentioned in the daily updates, I would like to
see the VIX get to around the $22 area, but I am not
certain it will.
It could spike on a final flush out.
As a result, I am going to suggest a put position on the VXX.
While the standard allocation is 2% of a $100,000 portfolio,
I am only going to suggest you scale in with a .5% allocation.
This way, if the VIX does move higher, we can add to the
position.
I also want to buy a little time with this position.
So, my suggestion today is to Buy to Open the August 7th-$20.50
put on the VXX.
The August 7th-$20.50 puts are quoted at $1.76 to $1.86.
Assuming you can get a fill at the midpoint, which is $1.83, a
.5% allocation would mean you would initiate this position
with a 3 lot.
As I said before, if it does continue up, I plan to add to this
position.