The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.
Hey Traders,
On Wednesday, the FOMC minutes came out, and the market did not like the news.
Any chance that the day was going to end positive was put to rest … or so it seemed.
But then 2:05 p.m. ET, markets went parabolic:
This move is one of the nastier midday moves I have seen.
The S&P 500 rallied about 30 points in a matter of minutes.
After the bell, we got NVDA news, and boy is AI a driver. The stock is up around 80 dollars as I write this, a gain of market cap of over 200 billion dollars!
Yet, leading into these earnings, the VIX closed at over 20, settling at 20.11.
In the last few days, despite not a huge move in the SPX, VIX has really perked up:
Wednesday marked the second settle above 20 since March 28th.
Yet I am here to tell you options remain cheap.
Selling pressure on near dated options for income allows for traders to buy near term exposure for next to nothing.
We moved 30 points on Wednesday and over 25 on Tuesday – debt ceiling news can move markets
Why is the Friday straddle so cheap?
I can get a look at the end of the day on Friday for 42 bucks – 1% of the value of the S&P 500.
That’s WAY too cheap, given how sensitive the market is to news right now.
I know I keep saying it, but so far I have been right. I would buy this.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian