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

Hey Trader,

The Option Pit VIX Traffic Light is green.

The S&P 500 (Ticker: SPX) finally followed through on its classic bear market sell-off …

A bad Thursday, a worse Friday, and a total meltdown on Monday.

The SPX is stalling at 3,800 … a HUGE level …

Because it represents the SPX being down 20% from its peak:

If this breaks, all hell could break loose. 

The S&P 500 needs to close above 3,800, or the money is going lower.

And VIX looks like that could happen.

After sleepwalking its way through most of this selling, the VIX and VIX futures really perked up on Monday: 

And this is after being flat, or being in contango (futures trading above spot), for the last few weeks. 

VIX is making a hard move higher on Monday.

If SPX does not break back above 3,800, we are going to 3,700 or lower.

Add to this, the VIX of VIX, VVIX, has woken up:

But believe it or not, VIX options are still cheap. I would look at the 32.5-strike calls expiring Tuesday for a one-day hold.

Your Only Option,

Mark Sebastian