Hey Traders,

The markets opened down pretty big on Monday.

This was a result of the awful event over the weekend.

But as the day progressed the indexes got stronger and stronger.

By the time the day was done the DJIA was up .59%,  the SPX was up .63% and the NDX was up .51%.

The VIX,  coming off a weekend,  where VIX would naturally be up about .75 closed the day up .25…essentially down on the day.

VIX futures also ended the day down…in shocking fashion:

How is this possible after the terrible events of the weekend?

This is where the understanding that there is a major difference between what affects markets and what matters in real life.

In real life what happened over the weekend is terrible,  unspeakable.

For markets…it moves oil.

As the fear subsided of what might happen into how this REALLY played out,  in the end, the market decided that the events of the weekend were going to have this effect…

Pushing down US treasuries…

Remember,  US treasuries have been the main PROBLEM for the market…the rally in bonds on Monday…despite the reason was extremely beneficial for markets.

Seeing the 10 year up 2 days in a row was a huge help to markets and drove markets higher.

So how does this all play out…bonds have probably rallied as much as they are going to off this awful news…so has oil.

If we had not had a major event over the weekend the market probably would have been up more on Monday.

I think we have another couple of days of rallying potentially to 4400.

From there…I think we start to run into earnings and things will get ugly from then on.

Markets are going to be volatile including a period I believe where VIX gets over 20 for several days…all the way until Thanksgiving.

So how do you play this?

I would be long SPX and long VIX for the next few days…then once VIX gets low enough and SPX is at 4400, buy a bearish leaning strangle.

To fully understand what’s going to happen to the VIX, you must understand what’s going to happen to its ETF counterpart – UVIX.

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Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian