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

Hey Traders,

The S&P 500 took a beating on Thursday.

It was down over 3% at one point.

But the VIX … It’s still only 33.3.

How can it be so low?

Here is your answer. And how to play it …

SPX Spanked

The S&P 500 took it in the chin on Thursday, closing at 3,668.

It is clearly in bear market territory and potentially heading lower.

In fact, I think we could see it run all the way below 3,400 before buyers think about stepping in …

That happens to be where that circle below is – the high before the pandemic began: 

Heck it could go even lower…

I have AAPL potentially going to 100.

But the VIX

With that in mind, why is the VIX ‘only’ 33?

One thing to remember is how high 33 actually is …

Remember, the VIX at 33 means the SPX moves more than 2% a day for the next 30 days.

Given we are only open for 21 of those days, that means a daily move of about 2.85% when markets are trading.

That’s big.

I think we are at a spot similar to the post-Sept. 11 S&P 500.

Over the course of several months, the S&P 500 lost more than 30% … while the VIX basically did nothing.

We could see that again…

What does this mean?

You should be trading like the SPY Master.

Your Only Option,

Mark Sebastian