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

Hey Traders,

We have been watching a particular VIX indicator very closely over the last few weeks …

It has been sinking lower …

But did it reach a bottom?

On Friday, the VVIX – the VIX of VIX – ended at a new two-year low, 84.74.

On Monday, however, it bounced 3.9% higher to 88.05.

Now, 88.05 is hardly high … especially in light of how the VVIX has behaved the past couple of years.

But the gap higher does make me want to take a closer look at what is happening in the vol pits.

Because if VVIX is picking up steam … traders may be anticipating a move in vol, rather than seemingly expecting vol to sit … or move only slightly.

On Monday, we saw a VIX September 1-by-2 put buyer step in …

And we saw more of the 1-by-5 call ratio spread being rolled out of October and into March:

These traders are anticipating a move …

But the question is “when?” 

Your Only Option,

Mark Sebastian