The Option VIX Light Is Red, and Volatility Is Likely to Drop.

Hey Traders,

While the VIX moved over 20 the day after I floated the idea that it possibly might not …

That wasn’t really my point.

The idea yesterday was that the VIX was probably heading lower, back to more serene, pre-pandemic levels …

And I pointed out that a customer bought 10,000 July 15 puts gambling that it would drop.

So, with what happened yesterday, does the smart money think I am wrong?

Check out the volume on the 19, 18 and 17 puts in April:

About 70,000 contracts were traded on these strikes — almost all buys. In fact, I spent the bulk of the day trying to buy the 17 puts for .05 … to no avail.

Why? Because traders were paying .1 all day.

While calls DID outpace puts on Thursday, some of the biggest prints were put buys:

Institutional money bought the May 17 puts, the April 19, 18 and 17 puts and — piggy backing on yesterday’s size trade — 12,000 of the July 16 puts for .175.

All of this big money paper flow points towards Thursday’s price action being an anomaly that could last a day (or a few days) …

But it’s not something that breaks away from the theme of a falling VIX.

Like me, the smart money thinks the VIX is going lower.

I’m still a buyer of the 17 puts for .05 … in fact, I kind of hope we go a touch higher today so I can finally buy them.

The Option VIX Light Is Red, and Volatility Is Likely to Drop.

Your Only Option,

Mark Sebastian