The Option Pit VIX Traffic Light Is Red: Volatility is likely to slide.
Hey Traders,
On Monday, the NASDAQ 100 (Ticker: NDX) boomed higher up 147.68 points, or .95%, closing just off a recent high at 15713.28.
The SPX is also testing recent highs, closing up .39 points to 4522.64 – off the highs of the day, but still a nice rally.
But even as these indexes were rallying, volatility was increasing.
Yes, the VIX itself only closed up .14 points at 13.52.
But we saw pretty strong movement in the VIX futures.
July futures expire on Wednesday, August 15th.
Despite the big rally … the whole curve shifted higher:
Notably August and September.
So what does this mean?
We all know that there is a giant rebalance in the NDX (the QQQ) coming.
The bots seem determined to drive shorts out until the day it actually happens.
This is only going to make the move in these stocks worse as there will be a ton of bag holders.
Remember, the rebalance is going to cause the ETFs and Mutual Funds that track the QQQ to sell their top 5 holdings down from 46.5% to 38%.
Sounds small, but in dollar figures it’s huge.
We’re going to see one index in particular take it on the chin.
I want to hold strangles with a giant bearish lean in this index.
Against it, there are all kinds of hedges I can put on.
What is this trade?
Join me for a special live session at 1 p.m. ET to find out.
Because the rift that this run up has created is monumental …
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian