August 2013....Setting up for BIG MOVE in Equity Markets...!!

Sudden calmness post panic is sign of even bigger panic to come....
O Ashuji

Markets faith in Bernanke put is strengthened and markets are calm once again. But most global markets are showing big negative divergence with US markets reaching all time highs while most other markets yet to claim their May 2013 highs. April-June had wild swings across asset markets aka precious metals, bond markets. But come July 2013, things have turned quite with markets most followed magician (Ben Bernanke) calming things down or so market would like to believe. VIX is back to 12's, US markets continues slow levitation to all time highs. However global equity markets (other than US) are relatively subdued, interest rates have hardly budged. Price movement post late May 2013 appears to be classic topping move with sharp fall followed by slightly higher high (while other global markets have relatively subdued move). This indicates that next down move in global markets could be sharper than one we saw in late May 2013. 

Please refer

http://www.speculationanart.blogspot.in/2013/07/time-to-sell-bernanke-put.html

(Time to Sell Bernanke Put)

http://www.speculationanart.blogspot.in/2013/07/july-or-august-2013-big-move-in-nifty.html
 (July or August 2013 - Big Move in Nifty)

Options is the best way to monetize the coming move. 

In Indian (Nifty) context, VIX has collapsed to 16.7, while Nifty continues to have higher moves (up/down). 

IVs for both calls and puts VIX for August 2013 are relatively cheap at 14 and 16-17 respectively. 

August 2013 expiry has large number of trading days (23 trading days). 

All of the above coupled with global context indicates one of the best set up to play coming move through long straddle (for conservative traders) while risk takers can buy puts.