Hey Traders,
VIX futures have been stubborn over the last few weeks.
The July future has never been able to close below 17… not once!
The low close for July VIX is 17.47 … and it did close at that level twice.
The VIX itself has dropped into the 14s, and yet July VIX futures just won’t drop lower …
When will they move? Here is your answer …
Coming off the weekend, I typically expect to see the VIX up around 0.50-0.70 points.
But by midday Monday, the VIX was barely up at all …
Thus, it makes sense that the July future is down.
In fact, if the July future were to close at its current level of 17.35, it would be the lowest close that the July future has seen in its “life” …
With VIX itself at 16.30, that means there is 1.05 of decay set to come out of the July future between now and its expiration on the 21st.
Between now and then, I think the VIX is going to feel some pressure …
If the VIX can get back into the mid-15’s, then we are talking about HUGE potential downside pressure on the July future into expiration.
We have the potential for the lowest VIX settlement of the year, frankly.
So how do I play it?
Here are two ideas:
For one, the VIX July 15-strike puts are only $0.05.
If in the next week VIX gets to 15 or lower, these puts are going to POP.
And if it doesn’t … well, they are a $0.05 put …
Another play I like are the July 17-strike puts.
The 17-strike puts have traded over $1.25 at different points the last few weeks, but they are currently about $0.90.
If VIX sees pressure, these puts will expand quickly, potentially as high as $1.50.
Your Only Option,
Mark Sebastian