Composite Implied Volatility Sell Signal

By Lawrence G. McMillan

In the last issue, we mentioned, on page 8, that the Composite Implied Volatility (CIV) indicator was on “sell alert.”  Then in last week's Hotline update, we verified that a CIV sell signal had indeed occurred.  It has proven to be a timely signal.  This is an indicator that not many people are familiar with, so we will review the definitions and data that comprise the indicator.  In essence, it’s like a $VIX sell signal: if volatility gets “too low” and then begins to rise “far enough,” it’s time to sell.  We’ll define those terms in this article.  In addition, we will look at past signals in order that we might better understand what to expect in the coming days and weeks (or even months).  We’ll also show how this indicator generates buy signals as well, although that is not in the cards anytime soon...

Read the entire "Composite Implied Volatility Sell Signal" article (published 4/13/12) by subscribing to The Option Strategist Newsletter.