Stock exchange news. Last week amid the issued weakly macroeconomic statistics, S&P500 index future moved from significant option barrier of 1200 and again lowered to the minimal numbers of about 1120, which had been observed during the last period. Currently 1100 and 1050 option barriers, as well as a local minimum of 1077 represent the levels of support, which can stop or weaken further decline. The levels of resistance on the way upwards are represented by 1200 and 1250 option barriers, as well as the current month’s level of maximal volumes, namely, 1184.
S&P500 index volatility still remains at a high level: the weekly range of movement amounted to 89.25 futures points. At the same time during the last week’s most volatile day (Thursday was the day when most important weekly news were published; they appeared much worse than the forecast) the range of movement amounted to 61.75 futures points; even during the most tranquil day of the week, Tuesday, the actual daily volatility amounted to 24 futures points. The expected volatility of S&P500 index, characterized by VIX index, was lowering at the beginning of the week; however, after a stock market crash on Thursday rapidly rose and again went beyond the level of 40, which is a “storm warning” zone.
The calendar of economic news issues for the following week:
This period is not very favourable for working on volatility purchase or sale: due to the high level of expected volatility, its purchase is accompanied by increased time value decay provided that there are no extreme shoots during the day. In addition, there exists a high risk of rapid decline of expected volatility when the stock market moves upwards, as, due to volatility smile to S&P500, even a very high upward movement can not only give no profit, but also be accompanied by losses; speaking about volatility sale, it is an extremely risky tactics in the current situation. Consequently, it is currently reasonable either to withstand volatility trading, or to harden requirements to entry points and perform only short-term transactions on most important news.
Prepared by: MF Academy Department of Options
