The Option Pit VIX Traffic Light Is Yellow: Expect Wild Moves.
Hey Traders,
If you just looked at the closing price of VIX, you probably would have thought that the light turning yellow was wrong.
But on Monday, the VIX made a wild move.
It started the day WAY up, and ended the day pretty much flat (adjusted for the weekend).
The VIX had a huge intraday range on Monday…
VIX got over 23, only to end the day near 19.
That is a pretty wild day!
The big driver?
The Nasdaq 100 (Ticker: NDX).
The NDX, which has clearly been the driver behind VIX that last few weeks, had a massive midday turnaround on Monday:
For at least a day or two, the bottom might be in the NDX (and Invesco QQQ Trust (Ticker: QQQ)).
We could see a pretty strong short squeeze and a drive lower in VIX back toward 17.
This will likely put ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) below 11.
VIX is 19.4, up from under 17 on January 4th. In that time, UVXY is up just 0.48.
I would be a buyer of the UVXY Jan. 12-strike puts and the Jan.28 12-strike puts as well.
I think they will likely pay, if bought early, a decent amount by the end of the day.
Your Only Option,
Mark Sebastian