The Option Pit VIX Traffic Light Is Green: Volatility is likely to go up or stay high.
Hey Traders,
The markets took it on the chin again during Wednesday’s trading session …
The S&P 500 (Ticker: SPX) closed down 1.65% …
And yet the VIX finished … lower?!
What gives?
Are we nearing a vol breakout?
Well, the VIX remains stubbornly low, all considered …
Remember, the VIX and S&P 500 should be negatively correlated …
When one is up, the other is down, and vice-versa.
That has not necessarily been the case lately.
A break in this correlation can indicate volatility is about to make a move …
And I think this will be the case here.
But what I am really watching right now is the VIX of VIX, VVIX.
This indicates the appetite for VIX options in the market.
If VVIX is low, or falling, it tells me traders are not especially anxious.
Given the market action we’ve seen lately, I would expect VVIX to be much higher than it has been.
However, we did see it move up slightly today …
This is another sign that the breakout we are waiting for may be getting closer …
I would keep an eye out for the VIX to make a run higher …
Your Only Option,
Mark Sebastian