The Option Pit VIX Traffic Light is Red: Volatility Is Likely to Drop.
Hey Traders,
The VIX October future expires on Wednesday morning.
Heading into expiration, I can see some interesting expiration plays that could be nicely profitable.
As we head into October expiration, this month is shaping up to be potentially a new settlement low for the VIX.
Here are the monthly settlement prices for VIX futures and options so far this year:
With the VIX now below 17, we could be inline to settle below June’s low of 16.38, in the 15s if the market can stay strong…
With that in mind, I was looking at VIX options and saw a couple of inexpensive option plays for October that could pay off nicely …
Let’s start with the October 17-strike puts. They are currently $0.45, and the VIX is 16.50.
That trade, if it expired today, would automatically make $0.05…
But here is the kicker: if the VIX does get below 16, these puts will more than double.
I am potentially going to pick up a couple of these today.
Speaking of cheap …
Take a look at the 16-strike puts, they are .05.
While we might not settle below 16, if I buy 100 of these for $500, and VIX can manage get into the mid 15’s, these puts will go up by about 3-5 times …
Not a bad pay off for a cheap bet.
Your Only Option,
Mark Sebastian