Monday, December 5, 2016

XLU Analysis

Utilities SPDR ETF (XLU)

I shall use the JAN series of options, which trades for the last time 46 days hence, on Jan. 20.

Implied volatility stands at 20%, which stands in the 51st percentile of its annual range and the 44th percentile of the most recent rise. The price used for analysis was $46.68.

Here is a chart of XLU's daily implied volatility since late August.

XLU Implied Volatility, 8/25/2016 to 12/5/2016

Although the implied volatility's annual range, must barely, means my guideline that implied volatility be in the upper half of its movement for the past 12 months, the most recent range is somewhat lower.

And the implied volatility movement is ambiguous. Does the decline over the last few days mean there is no way XLU will reach the 50th percentile? Or is it a pullback preparatory to a further rise?

In either case, it's not reasonable time to enter a short options play, which relies on a decline in implied volatility for part its profit.

Decision for My Account

I am declining to enter a position on XLU because of the trend in its implied volatility.

-- Tim Bovee, Portland, Oregon, Dec. 5, 2016

Visual Guide to Elliott Wave Trading
by Wayne Gorman


Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading


Two social media feeds provide notification whenever something new is posted.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at

No comments:

Post a Comment