March 7, 2014

Intraday analysis

Initial bias was bullish. Crossover above initial range (formed by 10am) gave first buy signal.

Subsequently there were several more buy signals and one trailing stoploss exit. Basically we are looking at every new high as a buying opportunity. This works well in trending markets and the advantage is a clear stoploss and exit strategy. So if you buy at the green arrows bars, you will get out of the position immediately if the next candle closes below the low of the signal bar.

Something interesting was happening in options.

The 6500 call option moved from 60 to 120.

But the 6400 put option did not fall proportionately.

The reason is the massive 16% increase in VIX. This works to be advantage of the buyer so as VIX increases, a profitable trade becomes more profitable whereas a wrong trade does not lose that much money. 

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