The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move Wildly
The S&P 500 sold off by 29 points,mostly on the backs of mega caps.
Apple (Ticker: AAPL), which had a huge day on Friday, gave back a few points … but post earnings is still pretty darn strong.
The same holds true of INTC.
AMZN, GOOGL, MSFT, META … nobody wants them right now.
They are getting to the point where one has to wonder when someone will step in … notably on GOOGL and AMZN.
Despite the mega cap selling, the VIX curve actually steepened on Monday…
Why? The FOMC. The market is now 100% looking for language changes in the next statement – something to the tune of softening the pace of rate hikes.
If it happens … we’ll probably see some selling, believe it or not.
The market has priced in some language changes. If the FOMC changes language aggressively, then maybe we rally.
But what if the FOMC holds firm?
Vol of vol (VVIX) is about as cheap as it gets, near year lows.
I would be buying VIX strangles ahead of the Fed.
The Nov. 23 puts are dirt cheap at about .25. The Nov. 27-35 call spread costs about .75 or so – that is a CHEAP strangle. I am a buyer.
Questions about that? Drop a comment below!
Your Only Option,
Mark Sebastian