The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to swing wildly
Hey Traders,
The VIX got smoked on Wednesday falling 2.27 points to 24.64.
The VIX futures fell almost in lockstep with the index.
In the end, the curve looks exactly like it did at the close on Tuesday … just several points lower.
So what does this mean?
There are two main points…
- VIX traders were aggressively selling out of futures because they worried VIX could collapse.
In this scenario, VIX keeps falling and the futures slow down.
- The VIX curve is saying we could still pop.
Since the curve is still on top of itself, the market is telling us, “Hey … there is a lot of volatility.”
That is why VIX and futures are tied.
Regardless, the trade remains the same:
SPX vs VIX as a pair.
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Your Only Option,
Mark Sebastian