The Option Pit VIX Traffic Light Is Green: Volatility Is Likely To Stay Elevated.
Hey Traders,
The S&P 500 (Ticker: SPX) managed to save itself from a pretty ugly day on Monday.
The VIX on the other hand, continued its strength.
Even adjusted for the weekend, the VIX was pretty darn strong on Monday.
So what now?
Will this all end soon?
You might not like the answer …
For a second in the morning on Monday, the S&P 500 looked like it was going to break out higher, similar to Thursday’s price action.
That did not happen:
The S&P 500 briefly went positive in the morning …
Then … it melted.
At the end of the day, we saw a huge rally.
But VIX?
While it failed to close above 30, it did NOT fold in any way, shape, or form on Monday.
This is a market that is completely confused …
Something you expect when we have seen VIX futures in backwardation for seven days straight!
At this point, while the conflict in Ukraine is ongoing, and we have the FOMC and Quadruple Witching coming up in March, things are going to stay volatile.
You WANT to own upside in VIX.
I gave a bull trade in VIX call options yesterday for Volatility Edge …
At the same time, when VIX drops, it could be hard and fast, so owning bear positions that are short vega (vol) makes a lot of sense.
Right now, I like owning LEAPs put spreads in ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) and near-dated call spreads in VIX itself.
Your Only Option,
Mark Sebastian