The VIX Trade To Win Both Ways

Mark Sebastian

The Option Pit VIX Traffic Light Is Green: Volatility is likely to go up.

Hey Traders,

The S&P 500 (Ticker:SPX) had a day on Tuesday, running up almost 90 points!

That is a huge up day for the S&P.

But we have seen this before.

The SPX has had a number of pops, only to fail …

VIX, in spite of the big pop in SPX, held above 30:

What gives?

Well, remember that vol can happen up OR down. And the SPX running 90 points higher is going to support an elevated VIX.

So what’s next? Are we in the clear?

VIX of VIX did drop on Tuesday, falling all the way to 104:

I think there is a strong chance we will see a small rally in the SPX …

And then head for new lows.

I would buy VIX puts, and hold a bull call fly spread against it, looking to potentially win both ways.

I would buy puts on VIX and hold a bull call fly against it looking to potentially win both ways.

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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