Has The VIX Topped Out?

The Option Pit VIX Traffic Light Is Green: Volatility Is Likely To Stay Elevated.

Hey Traders,

With the escalation of the Russia/Ukraine conflict … 

It is perhaps not surprising that the Option Pit VIX Traffic Light is flashing BRIGHT green right now …

But after the initial jump this morning, some of the vol is starting to come off.

Have we topped out?

Well, the VIX futures curve is still fully backwards …

Which as you know, does not point to falling vol.

However … I do think we may be topping out … or will be in the near future.

Why is vol topping out?

Looking back at history … volatility tends to rally into a war, and drop afterwards.

Which makes sense when you think about it …

The “will they, won’t they?” has been answered, and it is no longer an uncertainty.

Take a look at the original VIX, and how volatility behaved during the Gulf war …

Chart courtesy StockCharts

Kuwait invaded Iraq in early August of 1990 … you’ll see volatility peaked early on, and then came off at least somewhat …

Until the U.S. involvement in early 1991, which saw a quick peak, followed by a quick drop … even though the war was still raging overseas.

The uncertainty is what creates volatility …

And as things start to play themselves out, vol comes off.

Today in my Volatility Edge program, we closed our long March 30/45 call spread today at $3.50 – that’s a 70% gain. 

Don’t miss the next one.

Your Only Option,

Mark Sebastian

Mark Sebastian

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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About the Author

Mark Sebastian

Mark Sebastian

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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