Quite a week - with a VIX over 30 going into last weekend - and now at the close of Friday the VIX was again 24.
So the question is was I too early with my shout out - or is my VIX of 30 a lame warning signal. In the end it is up to you - I don't think I will change much in my reaction when I see the vix again run over 30.
I lost my sense of direction - so I you expect me to tell you if it is up or down for the coming week - you can stop reading.
How did I trade this week - as said last week I would enter some delta20 strangles - the moment I thought the VIX was topping. I did and had some profitable trades. I rolled some of my long term index calendar - which are set under the market - from Nov to Dec. A bit early but the governing thought was to make good use of the elevated Volatility in the back month. I (re)entered - a bit late, since we are getting already close to expiry - a butterfly on the RUT using a 590 center strike (that is my second fly for Nov).
Over the weekend I read a lot of my favorite blog's and I read a lot of doubt. We all seem to be impressed by the price action and we all notice the lack of volume. The NDX seems to be taking a lead (up) - while the Rut seems to be a laggard. I read about a call for quality - that makes sense to me - I am already focus on quality US for sometime now - My favorite value manager is Jeremy Grantham of www.gmo.com - he is very generous in sharing his views and research. In their asset allocation they expect US Quality to gain approx 8.9% annually over the next 7 years - they expect their stock picking to add another 1.8% to that result. 65% of the US quality holding consist of the following equity.
| Microsoft Corp. | 6.6% |
| Johnson & Johnson | 6.3% |
| Wal-Mart Stores Inc. | 5.6% |
| Oracle Corp. | 5.4% |
| Procter & Gamble Co. | 5.3% |
| Coca-Cola Co. | 5.1% |
| Pfizer Inc. | 4.8% |
| Cisco Systems Inc. | 4.1% |
| Exxon Mobil Corp. | 4.0% |
| Chevron Corp. | 3.8% |
| PepsiCo Inc. | 3.6% |
| Google Inc. (Cl A) | 2.8% |
| QUALCOMM Inc. | 2.5% |
| International Business Machines Corp. | 2.4% |
| Abbott Laboratories | 2.2% |
Source GMO -
So when writing cash covered naked puts in retirement accounts - I keep a close eye on this list.
Lite week - Wednesday the Fixed Income market will be closed - don't except any fireworks on Wednesday.
Keep an eye on the VIX - cu all next week
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