Exchange news. Last week S&P500 index future not only proved the fact of having gone beyond the flat zone, but also passed several significant levels of resistance. Namely, the resistance was provided by 1250 option barrier and a 200-day moving average. By the end of the week the index future has set beyond the level. Positive news on economic recovery in Eurozone encouraged growth. Excessive growth was a part of market, which again proves the start of a new mid-term rising trend. The nearest levels of resistance on the way up will be represented by psychologically significant point 1300, option barrier 1350, which has earlier demonstrated its power, and 1400. 1200 zone is a strong support, whereas the level of maximum volume in October and a 50-day moving average provide further support; option barriers 1150, 1100, and 1050, as well as the local minimum of 1068, provide weaker support.
The actual weekly range of S&P500 index future has amounted to 72.75 future points. Thursday, October 27, became the day of highest volatility when daily range has amounted to 51.75 future points as a result of good news from European Union; Friday was the day of lowest volatility, for the market was resting after the rapid growth, and its range has amounted to just 11.5 points, which made up the minimum for several last months. The expected volatility decline has finally caught up with the pace of actual volatility, and VIX expected volatility index has dropped from about 30 to 25, which shows that the expected volatility is not excessive, but moderate. At the same time expected volatility will continue falling during further rise. It will drop to 15-20 points, which is to be considered by traders while buying volatility.
The calendar of macroeconomic news for the current week:
Short-term volatility purchase via strangles or narrow strangles is possible while waiting for the significant news to come.
Prepared by MF Academy Department of Options
