The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.

Because there is no getting away from (contradicting) macroeconomic events right now, the market has been in a chop mode.

We have bounced between 3850 and 4150 multiple times over the last few months …

In the past 3 months, the S&P 500 is a touch over 1% higher than it was when it started, despite all the up and down motion.

And now in the next few days we are going to get a fire hose of economic data…

Powell today, non-farm payrolls on Friday, CPI and PPI next week.

Today, the market is looking for almost exactly a 1% move:

Given the way Powell can move markets, this seems cheap.

Even Friday’s straddle price doesn’t seem very expensive:

At under 70 points, the market is looking for about a 1.75% move.

Again … seems cheap.

Right now, I would argue given the binary nature of some of these events, some sort of long premium strategy – a strangle or straddle – hedged with March puts makes a ton of sense.

Questions about that? Drop a comment below

Your Only Option,

Mark Sebastian