The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move Wildly

Ahead of CPI and post-election, VIX got a nice rally on the back of the S&P 500 selling off …

This was after a seemingly relentless move down for VIX.

But … this relentless selling has opened the door to a serious buying opportunity…

Not in VIX – but in the S&P 500 options.

Check out 20-day realized volatility in SPX:

It is sitting at 25 – just a point below VIX itself.

And likely to actually tick above VIX this morning when the action for Wednesday is priced in.

And this is with CPI on Thursday.

With movement and IV sitting on top of eachother, it’s an opportunity to buy premium in SPX.

Options – despite the VIX at 26 – are actually cheap in SPX … I would be a buyer.

With futures in a nice contango, I really like one of Andrew’s SPY Master-style trades …short SPX and Short VIX as a pair.

Your Only Option,

Mark Sebastian