The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to swing wildly

Hey Traders,

The VIX got another drubbing on Thursday closing down 1.03 points to 23.61.

This despite what was an extremely volatile day for the SPX:

Intraday, the SPX had some serious swings…

In about two hours midday, the S&P 500 dropped 50 points and completely rebounded,  closing near the highs of the day and over 4000.

The VIX curve widened:

The curve is still tight though…

This means that traders are likely aggressively selling VIX futures with the VIX cash index because they do not want to get left holding the bag.

That said…

The biggest orders of the day were long calls in the back months:

Traders do not like the long term outlook for the market…

Near-term though, I think VIX could make another run at 20.

The 21 puts cost about .15, the 22s about .35…

Those have really nice risk-reward if we continue to rally.

And that drop in VIX could lead to the Biggest Trading Opportunity of 2022.

Your Only Option,

Mark Sebastian