Remember rising markets?

Almost refreshing after so much turbulence… a steady move up.  Just like the good old days…of last month:

Resembles the days of yore… will it hold? Source: thinkorswim by TDAmeritrade

Volatility is duly contracting.  My trade idea yesterday would’ve been a good one (about 50% profit so far), but alas…I’m too chicken.

What to do now?  Pile back in?  The Death Cross says await 1900 on the S&P before getting back in.  The 50 / 100 MA Cross never left the market.  So what’s your plan?

The latest “I’m too chicken to put on this trade” trade idea

Speaking of VIX, look at the term structure of the futures, compared with the past couple months:

Backwardation??? Source: thinkorswim by TDAmeritrade.

It’s well known that, in times of great stress, the VIX goes from contango to backwardation.  Once everything cools off (and I do believe things will cool off), the contango will return.

The trade: VIX calendar spread

• Short Nov ’14 VIX future
• Long Dec ’14 VIX future
• Spread costs about 1.25 credit (that’s $1250 per spread) right now – when returning to backwardation, exiting the trade will be a credit as well.

Why I’m too chicken: if the fear has way further to run, there’s no end to the pain that can be suffered with this trade.  I stay plenty awake at night worrying about my other positions…

If anyone else puts this trade on, let me know how it goes!