The Option Pit VIX Traffic Light Is Green: Volatility Is Likely To Stay Elevated.

Hey Traders,

The SPX ended the day down about 67 points, or about 1.55% down.

But the VIX made another big move higher. It closed the day at 33.32, up over three points!

VIX is now pricing in more than 2% a day in movement …

This seems hot, given the actual movement in the S&P 500.

The VIX is completely outperforming SPX right now.

SPX has moved more than 2% about once in the last 10 days.

Intra-day it has gotten there a few times, but close-to-close … not even close most of the time.

But VIX keeps going up, and backwardation (futures trading progressively lower below spot VIX) is getting bigger not smaller!

VIX has been in backwardation for most of the last month and eight days straight.

Tuesday represented the steepest we have seen since the market started really falling apart.

And if you think we could get a drop out of VIX soon, I would take a look at the paper that traded on Tuesday:

A customer unloaded 50k March 23-strike puts.

We also saw this:

A customer bought the 100-strike calls in VIX..

Now think back to that customer that bought all those giant VIX back spreads a few weeks ago.

You remember they bought the October 35-75 1-by-5 call ratio (buying five 75-strike calls) 30k by 150k over the course of 3 days.

They also did it smaller in some nearer months …

I thought these customers were looking for just a move to 50, but they might be thinking MUCH,  MUCH higher …

Your Only Option,

Mark Sebastian