SPX About Ready to Bounce?

One of the things I teach my option mentoring students to do is to watch for when traders are buying/ selling premium.  It's one of the greatest tools a trader can gain during his or her option education.  While everyone is probably out there panicking about the deterioration in the Euro, how bad the US economy is, and AAPL earnings, I am wondering whether today might be at or near a short term bottom.  Here is why:  Premium is being sold today.

Notice the level of the VIX; while the market is now almost 10 points lower than it was at its worst yesterday, VIX itself has yet to touch a new high on the week (as I write this).  

Livevol (r) www.livevol.com

One thing I always look for when trading is lower highs in VIX relative to market performance.  It can be a great sign that the market is topping out.  As I have said many a time, it’s not VIX level that matters, it's VIX correlation that matters

livevol (r) www.livevol.com

Even if it does, it will do so at a much lower SPX level than it would have had to yesterday morning.  I would also point out that while VIX is topping out,   VVIX or VIX IV (see the red line above for Livevol's version) is breaking higher at a great pace.  Now that VVIX is over 110%, there is a good chance the market has hedged itself, and there will be less pressure for a huge sell off.  The SPX is hitting the lower bound of its 1330-1370 ping pong match.  Will it bounce off 1330? We will know tomorrow.  If it doesn’t, I will admit I am wrong.  If it does, then we could be headed right back up north.

The Trade:

I like Iron Condors and Put Spreads here.  I also think a short time spread could be effective, as I would not mind owning some gamma, especially if AAPL kills it tonight.  Which, with the way the earnings have been sandbagged, would not surprise me.

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