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

The SPX ran up 11.47 points on Wednesday while the VIX dropped .68 points to 18.23. That’s a stone’s throw from a new recent low – and we might get there.

But I want to point out an area that is seeing high volatility and the options are simply not pricing it in …

That sector is oil.

Check out the IV and realized vol in United States Oil ETF (USO) over the last 10 days…

Oil IV has been in consistent decline, just like S&P 500 vol, over the last 6 months.

But while the IV is dropping, we keep getting strong spurts of movement.

We are in the midst of one of those right now…

Take a look at Energy Select Sector SPDR Fund (XLE):

XLE vol is just off its six-month lows, but the stocks themselves are flying…

The gap between realized and implied is almost five points. That is huge.

I would be looking to own premium here …

Traders can pick a stock like XOM or CVX … or just buy options on XLE.

Either way, I think there are dollars to be made.

Speaking of dollars to be made …

Don’t miss Licia Leslie’s Profit Window live session tonight. The next 45 days offer HUGE potential for gains. See why and how you can take advantage during a no-cost session that starts at 5:30 p.m ET.

Questions? Leave them in the comments below!

Your Only Option,

Mark Sebastian