Absolutely No POT Double Entendre In This Headline

• Posted by Adam Warner
• on December 30th, 2009

So I spent about 90% of my time at the desk yesterday (about 12 minutes) running some charts to see if I can find a spot without an utterly dead volatility picture.

I defined it by this sort of graph above, eyeballing Bollinger Band Width and Average True Range (which is basically similar to the HV we usually use). Most everything I hit up just looked ugly and uglier.

But then hey, found this POT stashed away. It actually beat the moribund range trading rush back in September/October, but has since broken out a bit.

Now it’s not like volatility has spiked here, but at least there’s some life. Options though? Not so much. 30 Day IV trades at about 43, not much off the 52 week lows. And that’s actually below 10 Day HV.

Dare I say we have a spot we can legitimately justify buying options premium? It even gets better. While the volatility term structure of most spots slopes upward (higher volatility the further you go out in time), POT does not. So you can even buy some time here.

Now I rarely (almost never) just buy calls in something as a way to go long. But if I ever had a mind to, this POT looks as good as anywhere.

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