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Wednesday, December 1, 2010

For The 3rd Week, 117.5-123 Scenario Ongoing

-On Nov. 17th post, I wrote that SPY was entering into a new pattern, from sharp rise to a trading range. Well, this is the third week that I am reaffirming my scenario 117.5 to 123. Oh, I'm not in the business of making predictions, but this was and still is the most likely scenario, based on my technical indicators.

- All of the technical indicators did turn bullish today. Based on this, I would expect the probability of SPY moving up towards 123 to be higher than it moving down to 117.5. The Dec18 119/117 put spread closed at 0.51 and Dec18 124/126 call spread closed at 0.32. I would recommend selling 1 put spread and 1 call spread for combined 0.86 or higher.

- Although, based on my scenario and the FVE Indicator, yesterday was the ideal time to sell this spread. FVE indicator's value was 19.67 yesterday and 19.2 today, while mean implied-volatility was 20.4 yesterday and 17.94 today. Yesterday was the first time in two weeks where implied volatility was higher than FVE indicator's value.

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