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