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

Hey Traders,

As the week begins, the market is NOT focused on the FOMC for once.

Instead we are focused on the US Government – the debt ceiling debate.

Yet for all the headlines, the SPX doesn’t seem to be concerned.

The index is sitting just below 1 year highs:

The VIX, on the other hand, isn’t completely ignoring what’s going on.

Yes, it’s relatively low compared to 6 months ago … but it has bounced off its lows:

It also seems to really perk up every time there’s even a hint of a sell off.

This means traders are selling premium but are VERY nervous about it.

This would explain that while the VIX itself is lower, the VIX curve really hasn’t moved much over the past week:

And the spread between the cash and the futures is still super wide.

I think we have a move coming – a big one. It could be up, it could be down, but it’s coming.

And the market is not prepared for it.

The 4210 straddle for June 2nd, after the debt ceiling, is only 75 dollars … less than a 2% move up or down over the next 10 days.

I am a buyer of this.

Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian