Saturday, August 15, 2009

08/15 MNX Price & Volatility Study

I forgot to even run this study a couple days ago when I entered the MNX Iron Butterfly for September. It is one of those things: When you're following the index for a while, you kind of have a feeling for what is going on.

One way or another, what do I see on the picture bellow? I see that MNX has settled down for a few weeks. I hit a rough patch on the AUG trades, but there are less strong price moves than earlier on. Does it mean everything will be just fine? Of course not! It is just an acessment of how rough the waters are before we jump in.

I didn't run the VIPES study for the AUG/09 MNX Iron Butterfly, if I had, I would have seen I was sailing much more rough waters, take a look at the current study in contrast to last month's. Things I note:

1) This month we are moving from stronger price action in the 60 days chart, to a more quiet environment in the 30 days chart. It was the opposite situation last month.

2) This month we have just survived a bigger 5-Day Volatility wave, notice how this wave was just getting started last month.

What I want to be able to do in the future is to use this study to gauge how I should allocate capital. By collecting this data I can pretty much make inteligent decisions about my business. I can decide when to enter more or less capital in the market depending on how the environment is using a very objective perspective.

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