boehner-reid-300x168The primary provisions of the bill that was passed to avert the fiscal cliff are:

The marginal income tax rate will rise from 35% up to 39.6% for individuals making more than $400,000 a year and households with a combined income of more than $450,000.  The lower tax rates below those income thresholds will be made permanent.  Other provisions include:

  • A bump in the capital gains and dividend tax rates for high-income earners from 15% to 20%
  • A one-year extension of unemployment benefits for the long-term unemployed
  • A two-month delay in the $109 bln sequestration, which forced discretionary and non-discretionary spending cuts
  • A permanent fix for the alternative minimum tax
  • A 40% estate tax (from 35%), with the first $5 mln exempt for individual estates
  • A one-year deferral of a 27% cut in Medicare payments to doctors
  • A provision that allows businesses to write off 50% of new investments immediately

The VIX was up roughly 60% in the month of December from low to high.  On the news of the fiscal cliff avoidance legislation passing, the VIX dropped by 25% on the last day of the year and is likely to continue to go lower.  Getting past this binary, macro event is healthy for stock options trading.

Our market sentiment indicator turned bullish late last year.  We look forward to a robust options trading market to start 2013.

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