Going Down … Slowly

Mark Sebastian

VIX Option Pit VIX Light Is Red, and Volatility Is Likely to Drop.

Hey Traders,

The VIX got hammered on Wednesday.

With the S&P rallying 38 points — still below its high from Friday — the VIX index got SMOKED:

So the question is …

Where to next?

On Thursday morning VIX was continuing its move lower …

This is key — I want to see the VIX get back below 17 and into the 16’s.

If that happens then the “blip” of a selloff might be over and 4200 could be in the cards for the SPX.

I also like the fact that the iShares Russell 2000 ETF (Ticker: IWM) finally feels like it is getting a bid. On Thursday morning it was the strongest index — after being VERY weak:

If IWM can get above 226,I think it could make a run back at the highs from March.

A VIX Play

And what does that mean for volatility?

We will have our blips in vol, but the trend in VIX appears to be a slow path lower.

The VIX May 15 puts are .10.

I think those are cheap and I would be a buyer.

My plan would be to sell ½ my position at .20 and then ride the rest lower.

VIX Option Pit VIX Light Is Red, and Volatility Is Likely to Drop.

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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