How to Know When You Have an Edge

The Option Pit VIX Light Is Red, and Volatility Is Likely to Go Down

 

Hey Traders,

 

Every post that I write starts with this:

 

“The Option Pit VIX Light Is _____, and Volatility _____.”

 

I give you this information because it is the most important part of my trading.

 

Currently, as you may have noticed, the VIX Light is Red and volatility is likely to go down.

 

I have spent the last seven years using this indicator to trade volatility in both my personal accounts and for clients at my fund.

 

I spent years learning about the VIX and trading the VIX to develop this traffic light system that, on its surface, is pretty simple — but underneath is somewhat complex.

 

The traffic light looks at 4 indicators:

 

        • The VIX Curve
        • VIX Correlation
        • The VVIX
        • VIX realized volatility.

I recently wrote about the four indicators here.

What this traffic light tells me is how the VIX is going to trend over the next two weeks ..

 

It does not call what the VIX is going to do tomorrow.

 

But knowing the VIX trend is powerful — especially when paired with our VXX decay calculator.

 

On March 23, I bought the VXX April 10 puts for .05 in our Volatility Edge program.

 

I sold the put at a 120% gain and a 400% gain — and I still have a few left in my pocket.

 

This is a hugely profitable trade, and I was able to buy these because:

 

        • The traffic light told me the VIX trend would be down …
        • AND my VXX decay calculator said that these puts were too cheap.

 

Here is the price action of those puts over the last month:

 

 

Notice that sat around .05 for weeks and weeks and weeks.

 

We bought them just before they took off.

 

Without my VIX Light and my VXX calculator, I would not have known I had an edge.

 

You can learn more about both my light and calculator tonight …

 

The Option Pit VIX Light Is Red, and Volatility Is Likely to Go Down.

 

Your Only Option,

 

Mark Sebastian

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