Comments on: VIX Volatility is Back: Here’s How to Profit from a Complacent Market

By: Investment U

Investment U — Mon, 11 Jan 2010 21:44:29 +0000

J.M.,

Those were some rather detailed questions, which probably would require a very lengthy response, so we’d just like to let you know that Karim wrote us to say that he will do his best to address those questions in a future article. So stay tuned!

Good investing,

Investment U

By: J M Huber

J M Huber — Mon, 11 Jan 2010 18:52:06 +0000

karim,

What is the best way to play options on the VIX? What strike and month for hedging for the eventual market sell-off would you suggest? Finally, when the market does turn over, what specific Leap vechicles would you suggest to lock in a long term 10 bagger? Would precious metals play a part in hedging for long term gains?

Thanks!

By: madhav sane

madhav sane — Sun, 10 Jan 2010 23:31:37 +0000

Karim I fully agree with you & your strategy. My experience tells me same thing. Now is the time to be of more cautious.
Thank you
MGSANE

By: J E BAYLESS

J E BAYLESS — Sun, 10 Jan 2010 17:13:44 +0000

WHERE DO YOU GO TO DETERMINE THE VOLATILITY ON BAC IS 43?

By: Investment U

Investment U — Thu, 07 Jan 2010 18:03:02 +0000

Zoltan,

Basically, what Karim was saying is that during periods of low volatility buying put protection is much cheaper than times of high volatility. And, it is during these times that investors want to buy “cheap” protection to protect profits as the price of the puts can increase much faster than the decline in the market if volatility picks up.

Thank you,

Investment U

By: Zoltan Horvath

Zoltan Horvath — Thu, 07 Jan 2010 02:08:26 +0000

Karim…
I really don’t think you mean to help with this article, you are simply trying to create some buzz for one of your investment letters. But let’s get past that and get at the article and the content…
I have been studying options but this article was a complete mumbo-jumbo to me.
I understood the text portion and the main point but the example was totally confusing – I have no idea what you were doing.
Because buying put protection during low volatility is a very topical idea, could you please explain in plain English and in a simple step by step example what your proposed strategy is.
I have no idea how to approach or execute your example in the way you laid it out. Frankly, it was a badly done article.

By: Jim Falbe

Jim Falbe — Tue, 05 Jan 2010 21:11:37 +0000

Perhaps the unexpected high level of optionactivity during 2009 can be traced to the increased number of leveraged ETF’s. It is my understanding that they achieve 2x or 3x results by using options.

By: J E BAYLESS

J E BAYLESS — Tue, 05 Jan 2010 21:06:33 +0000

‘ Let’s consider a company like Bank of America (NYSE: BAC). I’ve included the options pricing tables below, so you can see how it works. Based on current volatility of 43, the price on the $10 two-year put option should be around $1 or just lower.’

GENTS- WHATS A CURRENT VOLATILITY OF 43 MEAN?

ALSO DECIPHER THE COST OF A 2 YEAR $10 PUT OPTION AS $1 PLEASE? DO YOU MEAN ONE DOLLAR, 10 DOLLARS, 100 DOLLARS?