Is The VIX Really Ready To Take A Break?

The Option Pit VIX Traffic Light Is Yellow: Volatility Is Going To Make Wild Moves.

Hey Traders,

The VIX light is now yellow. Does that mean the craziness is over?

Well, it means that the likelihood of the VIX going to 60 is a lot less than it was on Friday …

But is the VIX going to truly calm down and head to the 15-17 range?

Well,  the VIX Light switched from green to yellow mostly because the curve flipped back into a nice contango (futures trading progressively higher):

That said, the December future and VIX cash are still right on top of each other.

This means that the VIX could still pop …

But …

More than likely, it is going to fall…

If the VIX falls to 17, the December future could break 20.

If that is the case, there is still a lot of value in VIX puts.

And traders have definitely been noticing.

Check out the VIX put volume on Tuesday:

In unusual trading the 18-strike, 19-strike, and 20-strike puts all traded over 100,000 contracts,   and these were mostly buyers.

Personally, I see value on the 19 puts.

If VIX just calms back down into the low 17s, those will balloon to over $1.00.

I would be a buyer …

With a hedge (but the only way to get that trade is to be a member of Volatility Edge).

Your Only Option,

Mark Sebastian

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