The Option Pit VIX Light Is Red, And Volatility Is Likely To Drop.
Hey Traders,
Well … that sure was fun, wasn’t it?
The VIX is now 17.15, a nice drop of over four points from Thursday’s close!
But now that we are back to 17, where to next?
My Option Pit VIX Traffic Light will shine the way …
I lead off every post by telling you what the traffic light is showing.
Why?
Because it tends to work.
Last week we got a yellow light on Tuesday, and we had it back to red by Friday mid-day.
Friday morning we were short ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) and VIX, both of which are down significantly.
It works pretty well I must say.
But, I am not here to brag …
I am here to implore you to pay attention to what that light is saying!
Right now, the light is red.
Three of my four indicators are red.
One is yellow …
Because the VIX drops almost as hard as it pops!
(The indicator is the realized volatility of the VIX.)
So with the VIX at 17.15, and the VIX Traffic Light red …
I can tell you with high confidence that the VIX is probably going to be near 15 by the end of the week.
I am long puts in UVXY and VIX, and I intend to hold them for a bit.
If I was planning to add to my position, I would add the September 17-strike puts for about $0.50.
Your Only Option,
Mark Sebastian