With  IV  near  all  -me  lows,  iden-fying  trade  opportuni-es  has  been  an  increased  challenge.  We  decided  to  look  deeper  into  the  current  market  

condi-ons,  with  a  focus  on  cyclicality,  and  address  the  ques-on:  how  far  extended  are  we  from  

normal?�    

     

Overly  Extended?  

1  of  9

First  we  looked  historically  over  the  past  23  years  at  market  ranges  and  how  they  compare  month  to  month.  

We  calculate  a  monthly  range  as:    

(Month  High  -­‐  Month  Low)  /  Month  Low        

Overly  Extended?  

2  of  9

...  

7.4%

6.1%

7.9%

6.6% 6.5% 6.1%

7.4% 7.7%

8.0%

9.6%

7.9%

5.9%

4%

5%

6%

7%

8%

9%

10%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1990 - 2013 Monthly Average Ranges (Hi-Lo/Lo)

We  see  that  ranges,  on  average,  tend  to  be  higher  in  the  beginning  of  the  year  then  fall  in  the  summer  months,  before  rising  again  in  the  fall.  The  highest  

ranges  tend  to  be  in  October  and  lowest  tend  to  be  in  December.    Next,  we  see  how  this  year  compares  to  

historical:        

Overly  Extended?  

4  of  9

...        

...  

7.4%

6.1%

7.9%

6.6% 6.5% 6.1%

7.4% 7.7% 8.0%

9.6%

7.9%

5.9%

4.5%

7.5%

2.7%

4.6%

3.5% 2.7%

2.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1990 - 2013 vs 2014 Monthly Average Ranges (Hi-Lo/Lo)

1990-2013 Averages 2014

Next,  we  looked  to  examine  monthly  vola-lity.  Using  VIX  data  from  1990  to  present,  We  

bucketed  by  month  again  and  took  the  month  by  month  averages.  

       

Overly  Extended?  

6  of  9

20.1 20.1 19.9

19.1 18.9 18.9 18.7

20.2

21.5

23.0

21.7

20.2

16

17

18

19

20

21

22

23

24

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Average Monthly VIX Level 1990 - 2013

Again  we  see  the  slump  into  the  summer  months  with  average  vola-lity  increasing  again  into  the  

fall.    

How  does  this  year  compare  to  the  average:    

     

Overly  Extended?  

8  of  9

James  CHART        

20.1 20.1 19.9 19.1 18.9 18.9 18.7

20.2 21.5

23.0 21.7

20.2

14.2 15.5

14.8 14.2

12.5 11.5 11.9

8

10

12

14

16

18

20

22

24

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1990-2013 2014

2014  vs.  1990  –  2013  VIX  Monthly  Averages    

Overly  Extended?  

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