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

Hey Traders,

The S&P 500 (Ticker: SPX) closed down on Thursday …

So did the VIX …

Unlike other days, VIX got hit pretty good.

As you know, one of the things I watch closely is VIX negative correlation to SPX. For the last three days, VIX has been softening, while the S&P 500 is mildly up.

So what should we expect?

Well, as we have talked about, next week is going to be a doozy!

Tuesday is VIX expiration, Wednesday is the FOMC, Friday is Quadruple Witching …

So what is up with this?

VIX is getting smoked as the S&P 500 essentially sits.

Is this a green shoot for the market? 

Maybe …

But remember, VIX is still 30, and in order for VIX to stay this high the S&P 500 needs to move 2% per DAY!

It has not been doing that over the last week.

But …

Before you get too excited, be aware VIX is still backward:

And then there is this:

That’s heavy put volume on Credit Suisse (Ticker: CS) … which wasn’t the only European bank being hit by put-buyers yesterday …

If European banks are about to tank, so is the market.

The point is this: right now we are in a bear market, and VIX has volatility fatigue.

But, if a shoe drops, VIX is going to 50.

Of course, if not, we could see a 25 VIX by Tuesday.

Your Only Option,

Mark Sebastian