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Monday, January 3, 2011

Implied Volatility High Compared to FVE

-FVE indicator's value is at 12.1, compared to mean implied volatility on SPY options of 16.12, according to IVolatility.com. As I expected last week, market makers would take profits and buy back their short options positions. This is probably the reason why implied volatility has risen over the past week, even though the market had remained quiet and unchanged.

-Some of my indicators are starting to show bullish energy subsiding, and SPY is due for a correction, but I feel implied volatility (although still at low levels) is overvalued.

-I would sell the Jan 22 120/129 strangle for 0.90 or better.

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