The Option Pit VIX Traffic Light Is Green: Volatility is likely to stay high.
The S&P 500 dropped 23.55 yesterday.
About right in the middle of the intraday range.
The VIX, though, was perky, running to 33.63 up 1.18 points.
Obviously the run higher is directly related to PPI and CPI, which are going to be released today and tomorrow.
One of the nice things about having daily expirations in SPX is that we can see exactly what the market is looking for heading into an event.
The straddle price is a touch over $50.
This means the market is looking for a $50 move from 3590 either way.
This is about an 8-point premium over the previous day. Not exactly a huge amount and, to me, this seems cheap – with the VIX in backwardation:
UVIX merged with an SPX play makes some sense.
The easier trade is to wait for PPI and then react by making a trade.
I would see what the initial move is on Wednesday and go with it.
Unlike the FOMC meetings, this is a pretty cut and dry number.
Your Only Option,
Mark Sebastian