The Option Pit VIX Traffic Light Is Green: Volatility Is Likely To Stay Elevated.
Hey Traders,
On Friday, the market looked pretty darn boring …
Until the last half hour.
The S&P 500 (Ticker: SPX) fell apart, and the VIX popped.
So what is on tap for this week?
More of the same or a turn around?
Friday’s melt at the end of the day was not encouraging…
But this is a new week! Maybe markets will turn around?
I would like to point out that there are two very important things going on this week:
- FOMC on Wednesday: Fed days have not been good for the market. (Be sure to register here to join us for a pre-Fed live event to discuss the ramifications of their rate-hike decision!)
- It is Quadruple Witching Expiration this week.
How bad have expirations been over the last year?
Take a look:
Just about every small or big sell off started during the week of expiration.
In fact, the Friday before expiration has been a top on multiple occasions.
If you are an optimist, you might say the market has been so bad that maybe this week will be different.
But until the market proves it can rally during expiration, I do not think that is the right way to play this market…
Plus, despite volatility pulling back a touch, VIX futures have been in backwardation (futures trading progressively lower below cash VIX) now for almost a MONTH!
That is huge … and tells me volatility isn’t ready to evaporate just yet.
Your Only Option,
Mark Sebastian