The Option Pit VIX Traffic Light Is Red: Volatility is likely to be stable or drop.
Hey Traders,
The VIX appears to be primed to touch 20 for the first time in months.
In 2022 a 20 VIX has been the kiss of death; it has been the top for the market.
Just take a look:
The question now is: are we going to break the trend …
Or is this the real deal?
There is a major difference between the few times VIX has been this low this year, and this time.
It is VVIX (VIX of VIX):
VVIX is approaching not just annual lows, but multi-year lows, and is already at pre-pandemic levels.
This points toward this rally being different.
The market is betting hard on a Fed pivot …
And potentially, we already know the bad news.
If we know the bad news, and can see profits like we saw out of Apple (Ticker: AAPL) and Amazon (Ticker: AMZN) earnings last week, maybe the market can go back to rallying …
On the backs of mega caps and oil.
And potentially, we already know the bad news.
For now, the play is to lean short until the market says otherwise. Chances are the VIX is going to at least touch 20 at this point.
The 23-strike puts I suggested a few days ago are up 100%, even with the hedge.
Looking at the VIX option complex…
Explain to me why the 21-strike puts are so cheap:
For $0.40, these puts are a cheap buy, and so are puts in 2x Long VIX Futures ETF Fund (Ticker: UVIX) and ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY).
Your Only Option,
Mark Sebastian