The Option Pit VIX Traffic Light Is Red: Volatility is likely to fall or stay low.
Hey Traders,
We continue to see traders press on the VIX.
At the highs, on Monday the VIX was down on the day.
This was very early in the trading session so it should be noted.
Near term, Option Pit VIX Traffic Light is red but I continue to see signs that this is not over …
The Vix closed 21.29, up .14 points …
Coming off a weekend, we can consider this essentially down …
Remember the weekend effect should have VIX higher by about .75 points on Mondays all other things being equal.
For now …
With August so far below September, the curve is saying: SPX up, VIX down:
And as cheap as the August figure might feel at 22.65, it is trading at a 1.5 point premium to cash … with about a week to go …
That is HUGE…
Near term, owning August puts is likely to pay, I really like the August 21-srike puts for about .55.
However, long term the curve still leaves a ton of doubt.
In addition, VVIX has bottomed:
Since breaking 80 on the 29th, VIX options have been bought in droves …
In August they are buying puts, in the other months, they are buying calls …
As I stated on Monday, this is the play …
Buy August puts, make money, and take some of it to bank away Sep, Oct and Dec calls.
Your Only Option,