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

The S&P 500 dropped a “whopping” 1.14 points on Tuesday.

That’s what average investors saw.

But the S&P 500 had a huge range on Tuesday … it moved over 90 points from high to low, whipsawing everyone it could.

The VIX, meanwhile, went from down big … to down a little, to down big again, closing the day at 18.91. That’s off the lows, but still down 1.43 points.

It was a rough day for volatility. VVIX dropped 4.75 points to 89.20.

But underneath all of this something is looming…

There were traders saying VIX is dead, that it’s no longer relevant.

That is clearly not the case …

Volume in VIX options has exploded:

I could lay out the stats, but I think the visual does all the talking.

VIX options volume is going through the roof. Why?

The answer is simple:  ATR

While traders have been fading volatility, Average True Range has stayed above 60. This means the index is moving.

There is money to be made trading volatility.

SO what do you do? With the action yesterday, I think we run to 4200 before we turn around.

I would buy calls in both SPX and VIX as a pair.  Or simply buy a VIX strangle.

Questions? Leave them in the comments below!

Your Only Option,

Mark Sebastian