The Option Pit VIX Traffic Light Is Red: Volatility Is Likely To Drop.
The release of yesterday’s Fed minutes sent the market into a spiral …
And the VIX surging higher.
But the VIX and broad market indexes aren’t the only thing getting hit by the increasing Fed hawkishness …
iShares 20 Year Treasury Bond ETF (Ticker: TLT) has not had a hot start to 2022, with TLT now approaching six-month lows.
But if you look at TLT’s 30-day implied volatility (the red line on the bottom half of the graph), you will see vol has not really spiked, only started to swell a little bit.
What does this mean?
If vol continues to swell, we could be getting ready to see TLT flush below $140, a level it has not breached since June.
Now, what implication does this have on the broader market?
It will be yet another headwind facing tech stocks …
But a tailwind for Financial Select Sector SPDR Fund (Ticker: XLF).
XLF has been climbing, and XLF implied volatility (red line on the lower graph) is cheap right now.
Now the question …
How do you play this?
Personally, I like long calls in February …
Your Only Option,