The VIX yesterday made a 6 point plus jump shot to close at 31.70. This is near 1 year highs of 32.24, but is this the ceiling? Possibly. In situations like this where volatility is peaking (if it is indeed peaking), it is best to buy a long call on the index.
Two things though, I am not sure if it has peaked yet, the gods are out for sacrificial blood, and Lehman may not be enough. There is still some young goat blood out there. And second, I am very weary of opening any long positions heading into October, the season when the gods become naturally angry and demand homage.
So, if I were to go long, and I not saying I will just yet, is buy index calls with plenty (maybe 6 months or more) time. The DJX's implied volatility is hovering at 31.92% (right on par with the VIX). However, calls far enough out (March 09) are asking about 7.55 at the money--little bit expensive. Take your time and do your homework before you decide to go long.
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