BY MARK SEBASTIAN
September 14, 2023
Hey Trader,
The VIX got SMOKED on Wednesday.
CPI came out and the indexes really did not move.
SPX was up .12%, NDX was up .38, and the DOW and the RUT were red.
VIX fell .75 points on the move closing at 13.48.
What caught my attention though was the VIX Futures curve.
September got annihilated…
September futures closed at 14.65 on Tuesday…then closed at 13.85 on Wednesday…
That is right the future dropped more than the cash index!
With 6 days to go, how is the September future only .37 above the cash index?
Something has to give…
Either the cash index is going to 12.90 or the futures are too low.
Normally I would bet on the futures being right and say VIX is going to 12.50.
But in this case…remember next Wednesday is the start of the FOMC meetings.
Vol is going to start creeping higher.
The 14 calls only cost about .40…
That is WAY too cheap, I think a bull call in VIX makes some sense here….preferably against a long.
The alternative would be to buy the 14 call for .40 and buy the 13 put for .10…
I think you will get a chance to win on both sides of that trade.
Questions about anything? Leave a comment below!
Your only option,
Mark Sebastian
Mark Sebastian
Founder & CEO, Option Pit
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