The Option Pit VIX Traffic Light Is Red: Volatility is likely to decline.

SPX dropped more than 2% on Monday.

The VIX closed the day with a huge rally, running over 24 for most of the day before finally settling at 23.80.

But what a difference a day makes.

Here was the curve on Friday:

The spread between cash and future was 3.60 points.

Now…here is Monday:

The spread tightened by a full 1.80 points!

Now, about .80 of that is the Weekend Effect.

But the rest is all the move on Monday.

This is why today is so important.

If the market continues on its path lower, then we are heading right back into the volatility regime we were in for most of the year.

BUT …

If we turn around on Tuesday …

Then we could head right back below 20.

Your Only Option,

Mark Sebastian