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

For most of Wednesday, things looked pretty darn hunky-dory.

Vol was way down, VIX was down, and the S&P 500 was mostly up.

Then the Fed statement came out and futures took off … and then they didn’t … and then they did again …

As FOMC Chairman Jerome Powell spoke, it was as if indexes hung on his every word.

Apparently his last word was the strongest – when he got done, things fell apart:

What’s fascinating is that despite the selling, the futures curve DID NOT move very much:

April was up less than a point and the back end was basically unchanged.

The old saying goes: the first reaction is usually the wrong reaction.

I would not be surprised to see us test 3900 on the open on Thursday and then bounce.

So how do I play this?

Based on Monday’s and Tuesday’s posts I would be short SPX, Short VIX, and Short VXX.

I would leave on VIX and VXX, I would Sell SPX and roll down to a lower strike likely using a put spread.

This will leave me much more short volatility but give me downside in SPX if things continue to push lower.

A rebrake of the 200 DMA? I’d be out of my short volatility positions.

Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian