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

Hey Traders,

The VIX is back over 30 as of Monday morning, but for how long?

It seems like the market overreacts at night, and seems to calm down during the day.

If you’re trading volatility, you can get tossed around pretty easily!

So how do you play VIX, ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY), and iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) right now?

Let’s take a look.

The VIX futures curve has been in backwardation for seven full trading days:

The VIX of VIX, VVIX, on the other hand, has pulled back to the 120s:

So what is going on here?

We are entering a bear market, where we could see the market ease back and VIX not really get a pop.

This means I want to day trade the market: ride UVXY higher on big down days (making sure not to buy it in the first fifteen minutes of the trading session)…

On days where vol is coming off, we can ride it for a day or two, but a long term hold is a bad idea unless it's done with a very  specific set up.

In my Volatility Edge program, we have on a bear condor that will decay over the coming weeks, and sets us up to make some dollars if vol comes off.

But we are always looking for plays to go long over the course of a couple of days.

Right now I like the 35-45 call spread in VIX with long 20 puts.

Your Only Option,

Mark Sebastian