Are We Headed For A Bounce … Or Break?

Mark Sebastian

The Option Pit VIX Traffic Light Is Yellow: Expect Wild Moves In The VIX.

Hey Traders,

We continue to see the VIX bounce between over 22 and under 19. It has been making wild moves for some time.

The VIX curve is flirting with backwardation (where futures trade progressively lower than VIX), at least between the February future and the VIX cash index:

In fact, briefly on Wednesday morning, we did get there …

But then we bounced.

When the cash touches a future, it is either a point where markets bounce …

Or a point where the market breaks.

So far on Wednesday, it appears to be a bounce.

But without a real rally, VIX could still make that run at 30.

So how do I play it?

The Feb. 19-strike puts are $0.80…

They were $1.50 about a week ago. If VIX does falter, these will be in play.

Alternatively, if VIX pops, I have a whole month to sit on these …

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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