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<P>THE DOCTOR wrote:
<BLOCKQUOTE TYPE=CITE> I think VIX may actually be more of an "environmental"
market sentiment measure than just a mere measure of option premium.
I agree with many of the VIX posts to trade off VIX alone would be myopic.
I do believe, however, that the market moves through periods of a changing
environment.
<P>In the late 70's a VIX(had on existed)in the 30% may have been a "fair"
measure. In the early 90's 30% would have been obscene. In
fact the market may be much more volatile today than at any time in the
past.....too many reasons to post but IMHO it has lot to do with the huge
decline in transaction costs and the impact that individual investors now
have have on actual volatility.
<P>What would genuine be interesting might be to examine VIX from a historical
perspective. Not what the market did when VIX changed and draw a
historical persepective...because I don't believe we are comparing apples
to apples...BUT rather the spread between actual volatility and VIX and
draw a HISTORICAL perspective from that VIX.
<P>IMPLIED VOL..which is what VIX is calculated from is much much much
more than a pure mathematical concept...it is a sort of garbage salad of
beliefs....fears....views and most importantly a measure of the DIFFICULTY
OF OPTION TRADERS TO EFFECTIVELY COMPLETE THERE HEDGING ACTIVITIES and
that value is clearly the highest(most difficult)it has ever been..{again
IMHO this comes back to the proliferation of electronic trading systems}.
<P>Another important point is that obviously no one indicator will ever
allow any of us to mechanically turn off our TRADING BRAIN and just trade
and I know nobody implied that we do that.
<P>In my view VIX has always been a weather report on the forward market.
In the current environment I view a VIX of 18 - 20 % as a precursor to
a selloff. Yet I would view a VIX of 15 16
17 or lower as circumstance under which I would "bet the farm" personally.
Having said that a month from now I might view these VIX levels totally
differently. I would have absolutely viewed them differently even
just 2 years ago. I'm one of the folks who was shocked to see the
rally of 97 and the rally so far this year at VIX levels what they were.
Yet if I can find a tool that will help make me money I'll adapt in a heartbeat.
<P>Dear Gary, Doc, Sneezy, et al,</BLOCKQUOTE>
In the most recent issue of the NCGR
Magazine, Spring 1998, there is an excellent research article by Ken Gillman,
"Stations of the Moon", which supports a theory long held by me that the
volatility of the stock market is in part a function of the 18.6 year cycle
in Lunar Declination and the Lunar Nodes.This cycle would have correctly
forecasted the a high for VIX in 1987 and a low for VIX for 1995-96.
<BR>The long term trend for stock market volatility should now be in the
increase until about 2005.
<BR>
<BLOCKQUOTE TYPE=CITE>Volatily,</BLOCKQUOTE>
Norman
<BLOCKQUOTE TYPE=CITE>
<BLOCKQUOTE TYPE=CITE>On May 23, 7:48am, THE DOCTOR wrote:
<BR>> Subject: RE: MKT VIX LEVELS
<BR>> This week's Barrons has an article on VIX levels and what they may
mean to
<BR>> the market. When you get a chance go to "THE STRIKING PRICE"
column.
<BR>> You can read it online at www.interactive.wsj.com and I think there
first
<BR>> couple of weeks are still free or obviously you can just get Barrons
on the
<BR>> newsstand. The fellow quoted "Leon Gross" at SalomonSmithBarney
is
<BR>> probably the sharpest derivative analyst around. I steal from
Leon every
<BR>> chance I get.
<P>Leon points out that some major tops in the market have been made
<BR>recently when VIX dropped below 19. Since VIX tends to do drop
<BR>as the market is climbing (maybe due to less premium pressure
<BR>caused by buying puts), and 19-ish has been the low point, that's
<BR>not too surprising.
<P>However, I think artificially deciding on a level of VIX for buy/sell
<BR>doesn't work well. VIX traded down below 10 in late '94, early
'95.
<BR>Here's a recent chart, courtesy Yahoo! that shows VIX over the past
<BR>year, vs. the S&P 500:
<BR> http://quote.yahoo.com/q?s=^VIX&d=1ys
<BR>and the past 5 years:
<BR> http://quote.yahoo.com/q?s=^VIX&d=5ys
<P>--
<BR>| Gary Funck, Intrepid Technology, gary@xxxxxxxxxxxx, (650) 964-8135</BLOCKQUOTE>
</BLOCKQUOTE>
</HTML>
</x-html>From ???@??? Tue May 26 21:28:03 1998
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Reply-To: wlm95@xxxxxxxxxx
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From: Wayne Moody <wlm95@xxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: Trading for a Living / paper trading.
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>>> In paper trading one is driven by a will to succeed. In real trading
>>> one is driven by the fear of losing.
>
>The above two sentences sum up the difference between day trading and paper
>trading succinctly. Does anyone have any suggestions on how to overcome the
>emotions of fear and greed when really trading? I am having a hard time
>entering positions, however, once I enter a position, I am fine - even if I
>take a loss. Has anyone else had this problem? If so, how did you overcome
>it?
Usually it's easy to enter. There's a strong belief that the outcome will be
profitable, and a sense of not wanting to miss the opportunity. Since you're
fine once you enter (even if you lose), it sounds like your hesitation may
be due to a lack of faith in your method(?)
I'd have to say that entering a real trade is still (for me) driven by a
will to succeed. It's later on that fear of losing enters the picture.
What works for me is perspective. If my method gives me 55% winners, I
already know the outcome of my next hundred trades. About 55 will win
and about 45 will lose. The group will show a profit. On the particular
trade I'm in right now, the outcome is unknown, and nothing in creation
can make it known before it happens. It therefore simply doesn't matter.
We are really trading a series, but we get in trouble because it unfolds
sequentially, in agonizing slow motion, seducing an emotional response to
the isolated trade. It's better to get emotional about the whole long-
range trading plan. Be afraid of how you'll feel if you blow the whole
thing by failing to execute it properly. Be afraid of yourself.
Fear of losing in any one trade is negative and can lead to self-destructive
action. If it loses, just let it lose, but don't try to anticipate it based
on market noise. Stick to your exit rules.
Fear of losing long-term can be positive, if you realize that the fix is
to concentrate on flawless execution of your plan. The emotion is directed
away from the present and toward the future, away from what the market
might do and toward what you, the trader, might do. Become terrified at
the thought of breaking your own rules.
Wayne Moody
wlm95@xxxxxxxxxx
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