ARKK Is At It Again… And VIX ETPs Are Noticing

Sample TextThe Option Pit VIX Traffic Light is Red: Volatility Is Likely to Drop.

Hey Traders,

On Wednesday, the VIX dropped below 18.

But unlike the last few days, iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) and ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) did not get destroyed. In fact, they only lost about the typical daily decay.

What is going on?

The answer: February futures did not drop today.

In fact, they were up:

While January futures were down, February ticked up.

What is the cause?

The answer rhymes with “Markk” …

When ARK Innovation ETF (Ticker: ARKK) funds dropped, the VIX came to life, and the futures noticed:

Unlike the VIX itself, futures never receded after the ARKK dump.

What we are seeing is the mega-caps cover up for a weak Nasdaq.

Remember, almost 50% of the Invesco QQQ Trust (Ticker: QQQ) is made up of just seven stocks.

Those seven were mostly strong on Wednesday …

The rest of the QQQ?

Well, it looks like ARKK.

So how do I play it?

I think an ARKK put spread, paired with either long calls or short puts in the QQQ, could pay nicely.

Your Only Option,

Mark Sebastian

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