It All Comes Down to This [VIX Edge]

The Option Pit VIX Traffic Light Is Green: Volatility is likely to stay high.

The S&P 500 dropped 23.55 yesterday.

About right in the middle of the intraday range.

The VIX, though, was perky, running to 33.63 up 1.18 points.

Obviously the run higher is directly related to PPI and CPI, which are going to be released today and tomorrow.

One of the nice things about having daily expirations in SPX is that we can see exactly what the market is looking for heading into an event.

The straddle price is a touch over $50.

This means the market is looking for a $50 move from 3590 either way.

This is about an 8-point premium over the previous day. Not exactly a huge amount and, to me, this seems cheap – with the VIX in backwardation:

UVIX merged with an SPX play makes some sense.

The easier trade is to wait for PPI and then react by making a trade.

I would see what the initial move is on Wednesday and go with it.

Join Andrew and I Wednesday night at 7 p.m. ET to find out how you can profit either way the market goes.

Unlike the FOMC meetings, this is a pretty cut and dry number.

Your Only Option,

Mark Sebastian

Mark Sebastian

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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About the Author

Mark Sebastian

Mark Sebastian

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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