Last week I pointed out how high VXSLV, the VIX of SLV options, was trading.
At over 78, VXSLV was at its highest level since March of last year.
I told you that VXSLV was going to drop quickly …
And, well, take a look at the chart:
VXSLV is down almost 30 points from the high close.
I also shared you that with SLV over 26, I liked selling the March 24 puts at 1.10.
SLV is down 1.30 from the high, about 5%. Yet take a look at the quote on the SLV 24 puts …
The put seller made .40 selling the puts and the ETF dropped.
This is the power of knowing where volatility levels are trading.
When vol is too high, it can make a trade win — even if the direction is wrong.
I tell retail traders over and over again:
“If you think you can ignore implied volatility and make money trading options, you are sadly mistaken.”
What happened with SLV options is case in point.
Even though the stock dropped 5%, a put buyer would have LOST money because the implied volatility on SLV options tanked so hard.
The takeaway? Always keep an eye one implied volatility. (And if you need help with that, the Option Pit team is here to assist.)
The Option Pit VIX Light Is Red, and volatility shorts are likely to win.
Your Only Option,