Hey Traders,

The Option Pit VIX Light turned Yellow on Friday morning.

This means we are looking for a strong move — either up or down — in the VIX.

And …

Monday morning, the VIX was down 4 points.

Will it keep going, or is this a big bear trap?

I can tell you this:

The market is positioned for a drop.

Take a look at open interest in puts and calls in the VIX options:

With the VIX blowing up and volume has increased … but the trading has actually been mostly to the downside.

Put open interest is 4.47 million contracts … call volume is only 4.08 million.

That’s right, coming in this morning — on the heels of a REALLY ugly close on Friday — there were more puts than calls.

And take a look at where the open interest lies:

The market is HEAVILY long at the money on downside puts.

Traders have been buying every put option from 26 to 17 they can.

This is not a market that thinks Thursday’s VIX spike is going to last …

And I predict VIX light will go Red tomorrow morning.

The Option Pit VIX Light Is Yellow, and Volatility Will Move ( … and we’re leaning toward down.)

Your Only Option,

Mark Sebastian