A Play For Intraday Pops (And Long-Term Drops)

The Option Pit VIX Traffic Light Is Red: Volatility Will Drop.

Hey Traders,

The Option Pit VIX Traffic Light is back to red; however, the last few weeks have been quite volatile.

The VIX even tapped over 25, and is STILL sitting over 18.

Yet, for those trading long volatility, pain abounds.

Let me explain what is going on, and how to profit …

Since September 2nd, the VIX is actually up nicely, about 2 full points.

Yet look at what ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) has done (the second chart):

In a period of time the VIX is up 2 points, UVXY is DOWN!

The lesson? UVXY can be played INTRADAY for a long volatility play … but holding it will only lead to tears.

Being short UVXY will pay though.

If you give yourself time, short vol has a very nice return profile.

The January 20-strike puts are about $6 — a nice value. 

Your Only Option,

Mark Sebastian

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