The Option Pit VIX Traffic Light Is Yellow: Expect Wild Moves In The VIX.
Hey Traders,
We continue to see the VIX bounce between over 22 and under 19. It has been making wild moves for some time.
The VIX curve is flirting with backwardation (where futures trade progressively lower than VIX), at least between the February future and the VIX cash index:
In fact, briefly on Wednesday morning, we did get there …
But then we bounced.
When the cash touches a future, it is either a point where markets bounce …
Or a point where the market breaks.
So far on Wednesday, it appears to be a bounce.
But without a real rally, VIX could still make that run at 30.
So how do I play it?
The Feb. 19-strike puts are $0.80…
They were $1.50 about a week ago. If VIX does falter, these will be in play.
Alternatively, if VIX pops, I have a whole month to sit on these …
Your Only Option,
Mark Sebastian
