Let's Get Paid | Option Pit

Let’s Get Paid

Mark Sebastian

Hey Traders,

On Friday, the VIX closed up 1.04 to 20.60.

Despite the giant gap between futures and the VIX, VIX futures movement was robust with the September future actually rallying MORE than the VIX:

This means the spread between the futures and the cash actually widened on Friday…

The spread now stands at 3.60 points

With 30 days to go until expiration that is incredibly wide.

Again this shows how little traders believe in the current levels of both the SPX and the VIX.

So what is the plan?

I think a pair with SPX and VIX makes some sense here.

I would buy a put or put spread in SPX and pair it with VIX puts.

With the spread so wide, there is a serious edge in owning VIX puts…

But remember…traders don't trust this market.

A put spread in SPX will pay if the VIX curve is right and vol is going to go higher.

And they’ll likely pay better than VIX calls because of that spread.

This is the type of trade Andrew Giovinazzi does in SPYMaster every week.

This is the perfect environment for that type of pair trade.

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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