The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move Wildly
The S&P 500 dropped 23 points during trading hours.
VIX rallied .11 points.
After hours is a different story.
At one point, the S&P 500 futures were down 80. They have since recovered some and, as I write this, and are down about 15 points.
The truth of the matter is that everyone was watching AAPL and AMZN.
While AAPL may turn out to be a bit of a dud earnings report, it might be a little lower on Friday.
Meanwhile …
AMAZON GOT DESTROYED!
Amazon traded as low at 87.59 on Thursday after hours.
Consider this … the straddle expiring tomorrow priced AMZN earnings at less than $12:
It moved over 23 dollars at one point!
So now that we have seen the mega tech names report, what is next for the market?
The answer is the FOMC.
The rest of the earnings are probably an afterthought.
We are in a contango …
And the market is now setting up for a fed pivot at the next meeting.
Here is a question though – what if it doesn’t come?
Near term, the play is this:
Short S&P 500, long VIX near dated call spreads – and back up the truck on longer-dated puts.
We are buying puts in May, June and July. With VVIX in the low 80s there is not a high cost to these options.
Questions about that? Drop a comment below!
Your Only Option,
Mark Sebastian