The Option Pit VIX Traffic Light Is Red: Volatility is likely to be stable or drop.

Hey Traders,

The VIX closed on Wednesday at 23.24, the lowest it has been in months.

While 23.24 still means the market is looking for 1.5% moves every day …

There is one thing I am watching right now is starting to approach historic lows …

We are seeing opportunities in the volatility complex that have not been around in over three years!

This indicator is saying that we could see a lot less volatility in the VIX futures going forward …

Yes, you guessed it … VVIX!

VVIX, the VIX of VIX is now approaching lows we only saw before the pandemic:

In 2019, we did see some prints in the mid-high 70’s for VVIX, but Wednesday’s 81.77 close represents the index’s lowest level since COVID…

It also represents the first real push for VIX back below the 20s in some time.

With the VIX itself in a VERY heavy contango (futures trading over spot VIX):

We are in a spot to seriously consider shorting volatility via VIX options and ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY)/2x Long VIX Futures ETF Fund (Ticker: UVIX).

I think we could see both UVIX and UVXY hit new all-time lows if we do not see a serious sell-off.

To make matters better, with VVIX so low, hedging is dirt cheap.

I like buying a lot of puts and hedging with a few cheap calls or call spreads.

I think that will pay off.

Your Only Option,

Mark Sebastian