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<DIV><FONT color=#000000>RTs,</FONT></DIV>
<DIV><FONT color=#000000></FONT>
<DIV> </DIV>
<DIV>The concept illustrated in this chart is profiting from short-term
mean-reversion of the underlying's volatility. Short term (green line) deviates
from the long term mean (grey line).</DIV></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>This company made news today - so here's a Friday-close
chart showing the interplay of contrasting short-term volatility in the
underlying with long term volatility of the same underlying instrument. A trade
was triggered MOC Friday. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=#000000>Larry Connors (Investment Secrets of a HF Mgr),
Natenberg (Option Volatility and Pricing) and Don Fishback (ODDS) all make ample
use of this short term "extremism" in their illustrated
trading.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=#000000>Diebold (NYSE:DBD) is down 8 points as I write this -
about 20% of its mkt cap as of pre-weekend close.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>Diebold short June 35 calls positions have gained 92%;
long June 40 puts have gained 350% over the weekend.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>One still needs technical analysis to predict
direction. In this case, all trend following indicators said "DOWN" so
unless some "internet" word was announced over the weekend, no trend
reversal was in sight.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>I have illustrated this using rectangles - five for
market going to sleep before exploding, and one for market being in panic stage
before cooling down - during the last 3 months - NOT counting
today.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>In options, such short term rewards come frequently
enough in a year across a universe of - say 350 large cap securities.
</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>I think Jeff Cooper made the point about traders
needing just one successful method - if applied consistently and with rigorous
money management - to turn profits into real wealth.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>Well - this here sure illustrates that point
:)</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV>IF one is right on the direction call....</DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>Regards</FONT></DIV>
<DIV><FONT color=#000000>Gitanshu</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV></BODY></HTML>
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