The Option Pit VIX Traffic Light Is Red: Volatility is likely to slide.
Hey Traders,
The S&P 500 had another big day on Monday closing above 4300 for the 1st time in months.
It moved .93% up to 4338.92, a nice 40 point rally.
At the same time though, the VIX was up.
Yes, it was a Monday so there’s the weekend effect … but not to the tune of 1.18 points.
The S&P 500 went up and the VIX went up.
Why?
One might argue that it’s because of CPI coming on this morning.
I would think it’s more likely the beginning of the end of a nasty short squeeze in the Nasdaq 100.
The move in the QQQ has been nasty. It’s up almost 10% since May 24th – that’s a wicked rally.
I’d say that’s probably too far too fast.
That could be why we’ve started to see vol go up with the market:
Vol is up 2 days in a row. Yes, there’s the Fed and CPI … but I think it also could be a sign that traders are getting a little nervous up here.
VVIX is also up 3 days in a row:
So what do you do?
We moved 40 points on Monday and we have 2 big economic numbers … plus this potential short squeeze.
Yet look at the straddle price for Friday afternoon:
50 bucks seems a bit cheap doesn’t it? It’s a buy.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian