The Option Pit VIX Light is Yellow, and Volatility Is Going to Move.

Hey Traders,

I’ve written over the past few days that we’re heading for all-time highs soon … AND that the VIX might drop below 20 this week.

Well, I was certainly wrong on the latter.

On the former …

That’s still up in the air.

Yesterday, the S&P 500 closed below the February low and almost flat on the year:

At the lows Thursday, the S&P was down more than 90 points:

Woof.

That is an UGLY candle pattern.

Something Curious

Yet, the VIX did not end up near last Thursday’s close, which was late-February’s high-water mark for volatility.

The VIX futures curve is also well below where the curve was last Thursday:

The purple line is from February. The blue is yesterday’s close.

The March future in particular is curious to me. It’s the first dots on the chart for both lines.

We’re a week closer to expiration, so it should have been MORE sensitive to a VIX pop above 30, not less.

We have also sold off about 5% of the VIX in the last week, but … meh.

To me, this spells out a short-term sell-off that will end quickly — not weeks of pain.

So the story I see still points to an all-time high … just not as soon as I thought.

Now, don’t get me wrong, I’ve put on hedges against my long positions …

But I don’t think I’m going to get a chance to use them.

The Option Pit VIX Light is Yellow, and Volatility Is Going to Move.

Your Only Option,

Mark Sebastian