Watch This Other Volatility Indicator

Mark Sebastian

The Option Pit VIX Traffic Light Is Green: Volatility Could Go Up.

Hey Trader,

In spite of my hopes that I would be able to switch the Option Pit VIX Traffic Light to yellow, instead it remains firmly green …

As volatility is indeed going up.

The VIX futures curve – which was in contango just yesterday – is now in full backwardation, with futures trading progressively lower under spot VIX:

But there is another volatility indicator I am watching today …

The CBOE Crude Volatility Index.

That’s right … oil has its own VIX.

And right now … there is plenty of volatility in oil:

Even as oil prices have dropped, the OVX has been rising higher.

Right now, the OVX is parked at 52 … that is significantly elevated from its usual perch around 30.

And I think we could see it on its way to 70 in short order …

So as oil prices remain volatile … oil stocks remain volatile right along with them …

There may be room for some trades there.

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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