Jan 14 2020

Best short term stocks to buy right now

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Best short term stocks to buy right now-Normally investors are accustomed to seeing the VIX drop as the market rises, so the fact that the two decoupled last week raises eyebrows.

Trade of the Day: iPath VIX Short-Term Futures ETN (VXX)

There can be a lot of opportunity in trades that conventional wisdom says make no sense

Stocks performed in a rather peculiar fashion this past week, rising sharply on Monday and then drifting sideways with a modest upward bias the next four days.

That’s actually not so peculiar all by itself. But what is somewhat surprising is that the S&P 500 Volatility Index (VIX) has also drifted higher. Normally investors are accustomed to seeing the VIX drop as the market rises because higher prices tend to reduce anxiety levels, so the fact that the two have decoupled — at least last week — raises eyebrows.

The reality is that the inverse relationship between the S&P 500 and the VIX is not quite as ironclad as most people think, and at times they can in fact dance gracefully together in sync like Fred Astaire and Ginger Rogers, or Beyoncé and Jay-Z, if you prefer.

The difference between what the majority believe and probability paths derived from scientific analysis is what the CounterPoint Options system is designed to exploit. The dilemma faced by people who are stuck with the textbook version of the VIX-SPX relationship reminds me of the great quote attributed to Mark Twain: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Today’s recommendation is for October puts on an exchange-traded note (ETN) based on the VIX, the iPath S&P 500 VIX Short-Term Futures ETN (VXX).

Buy the VXX Oct. 18th $30 puts at $3.65 limit and set up to sell at target $5.00, good only in the last 15 minutes of index-options trading (4 p.m. to 4:15 p.m. ET), so as to take advantage of a potential late-day surge.

As I mentioned last week, the CounterPoint Options system also has a position in VIX September calls. The system can sneak around and obtain success with contradictory recommendations because it is looking at different time frames as well as different analyses of these exact contracts. It’s really tough for humans to keep a lot of disparate paths and time frames in mind, but it’s not an uncommon workload for software specifically designed for this purpose.

The CounterPoint Options system is calibrated to determine when institutional investors have obtained much more or much less insurance than necessary. High-frequency, algorithmic trading has narrowed the field quite a bit when it comes to quirks of the market that traders can exploit, so this differential is all the more valuable for being relatively rare.

I realize that it can be hard to take trades like these, because for many people it just doesn’t seem right to lean against the crowd. But soon your mind will be rewired to think like a professional contrarian. And then it won’t seem crazy to buy what the mob is selling and throwing on the floor, and to sell when there are smiles all around.

Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.


Best short term stocks to buy right now


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