My VIX Predictions Ahead Of The Holiday Weekend

The Option Pit VIX Light Is Red, And Volatility Will Drop.


Hey Traders,


I am on vacation right now … well, another “working” vacation.


While I am working most of the morning, after 1 p.m., I am frequently checking the markets.


Thus, I have to admit, when I pulled open my phone and the S&P 500 (Ticker: SPX) was up 9 points, I was a bit surprised …


Why? 


Because most of the day, the S&P 500 was acting like it wanted to drop …


That said, I guess I shouldn’t be surprised that the VIX has been pretty anemic over the past week.


Even so, the VIX did not close at its intraday lows on Monday …


And VIX futures were actually flat on the day …


So where to next?


Monday was one of the slowest days in the pits for the VIX of the year …


On the day, only 216,000 contracts traded …


But the VIX itself was interesting to watch.


At one point, it looked like it was going to take off, almost touching 16.50 …


But in the end, it did nothing.


Ending the day slightly down, if you adjust for the weekend … 


So what now?


We are heading into a long weekend, which is going to drag on the VIX.


But will it create a drag on VIX futures?


Take a look at the curve:



The spread between cash and the future is currently sitting at about 2 points.


Historically, this is already wide for still having over three weeks to go until expiration … but recently, it’s about normal …


Over the next few days I am expecting to see the VIX drop significantly. I think we are talking about 14.5 VIX!


The futures, however, not as much…


If the July future gets to 17, I would be surprised..


Even so, that is going to put a big weight on VIX ETPs (exchange traded products), and to a lesser extent, VIX futures.


I’m looking for ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY), which closed Monday at 27.51, to hit 26 …


I’m also watching for a sub-28 iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX), which closed at 29.15 …


And I’m looking for VIX futures to 17 by Friday.


There are cheap put options out there, for savvy traders …


Traders that are members of Volatility Edge will see my trades this week …


Along with the first of five special bonus trades from our Option Pit Commodities Expert Bill Griffo … See what I’m talking about here.


Your Only Option,


Mark Sebastian

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