How Low Will We Go (And How To Trade It)?

Mark Sebastian

Hey Traders,

The market continues to take it on the chin …

Yet, even with yesterday’s sell-off, the VIX did NOT break 35 yesterday.

We saw a bit of a pop today … but it is not “enough,” especially considering the current state of the S&P 500 (Ticker: SPX), which is notching new annual lows …

What gives?

First, I think we have a lot of long puts that may be propping up the market.

When there is a lot of open interest at a particular strike, traders’ needs to balance their delta exposure can actually affect the demand for shares, causing the underlying to “pin.”

I am watching the 3,750 level as a potential breaking point … and I am still looking for the VIX to move to 40.

How will we know when we have gone as low as we are going to?

For one, I think we need to see the VIX of VIX – VVIX – get to at least 150 before we can call a true bottom.

At 124, it is still far too muted for me to believe that we are as low as we will go.

How do you play it in the meantime?

I will be looking to fade rallies …

Yesterday, my Volatility Edge members and I went long in the 35/45/55-strike fly …

For the full details, you will need to join us …

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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