The Option Pit VIX Light Is Yellow: Volatility Is Going To Move.

Hey Traders,

With the Option Pit VIX Traffic Light yellow, I expect to see some serious trading in the VIX.

Yet Wednesday was incredibly light for volume.

In fact, VIX open interest is down by 20%!

Here is the troubling part …

The VIX was down on Wednesday, and is trading back below 18.  

On the day, it had a decent range trading both up and down.

This is why when I looked at the stats for the day, I was surprised how light volume was.

Then I looked at VIX open interest  and saw that it’s down 20%.

Take a look:

Here is the interesting part: call open interest is only down slightly from normal open interest (about 13%).  

Puts on the other hand … the open interest is off by 34%!

That is a huge drop in put plays.

What is going on?

The answer is the macro environment …

As I stated yesterday, there is so much news to parse through …

It’s no wonder the market is confused and not trading VIX!

Once we see some resolution in the Chinese stock market, maybe then we will see VIX put volume run hot again.

I may take a page out of the ‘Hedge Fund playbook,’ and try to find some trades that other traders are missing.

(That’s what Frank Gregory and Andrew Giovinazzi help me with. You’re coming to their live special event tonight, right?)

In the meantime, I think I would be looking at stocks on CBOE, and getting a little bit bearish.

This type of drop in volume is VERY bad for the CBOE …

It might be time to look at puts.

Your Only Option,

Mark Sebastian