The Option Pit VIX Traffic Light Is Green: Volatility Is Likely To Go Up.

Hey Traders,

Nobody cares.

At least,  that is the way it seems if you are a VIX trader.

While the market ended Tuesday down only 14 points, it’s not like we didn’t see some movement.

That said, here is something to think about …

For the VIX to hold 32.69 – its closing price on Tuesday – the S&P 500 (Ticker: SPX) needs to move over 2% per day for the next 30 days.

I do not see that happening.

That said, I think we are in for a world of hurt … if you are an investor:

The SPX got no rebound on Tuesday.

Unlike in May, where a 20% drop created a huge bounce, the S&P 500 continued to drop on Tuesday.

Yet …

The VIX also took a dive:

VIX ended down 1.33 points.

With the S&P 500 having an inside day, maybe that to be expected.

But the FOMC is today. They could move the market in a giant way.

So what is a trader to do?

Buy VIX July call spreads, and buy out-of-the-money ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) puts against them.

Your Only Option,

Mark Sebastian