The Option Pit VIX Traffic Light Is Green: Volatility is likely to stay high.
The S&P 500 blew higher on Wednesday rallying a whopping 1.97% or 71.75 points.
The VIX dropped 2.42 points to 30.18.
What we are seeing is the beginning of a short squeeze that could last a day or two …
But the general structure of the market is still in effect.
The VIX is still in backwardation
The Green is Friday’s curve, the blue is Wednesday, what is important is not the front month, but the rest of the curve. Outside of October, the whole curve is up by about a point.
This is a sign the market is bracing itself.
The front month is going to move with the VIX, the back end though is anticipatory … you tell me what it is thinking.
There is a reason the hedgers are super long from November on … and somewhat neutral in October.
Then there is volatility correlation:
We are above where we closed on 9/23 in the S&P 500.
Yet VIX is higher … VIX is ramping up.
VVIX is in the same boat:
Vol is going to go higher, maybe not the next day or two … In the near term, I like being long the market …
But for October and indeed November I like being short…
How short?
I will reveal this Today at my special event where I will tell you exactly where I will be buying stocks.
Your Only Option,
Mark Sebastian