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

If you trade S&P 500 and VIX options you are really only looking at one chart:

What we have here is a convergence of 3 very important technical levels:

The 50 day around 3979, the 200 day moving average around 3940, and the long term trend line that is sitting just below 3940.

This explains the price action of Friday.

I did find it interesting that on the lows, our trader from Friday closed their put spread out and the market bounced immediately. 

That is part of the reason to watch SPX 0 DTE flows when a big trade goes off the market moves…

But while these 0 DTE can move the market intra day, they tend not to affect macro trends in the market…

And right now, it’s down.

At the same time, the trend for VIX continues to be down as well, despite the recent pop in markets…

Over the course of the next few months we are likely going to see the SPX lower, and the VIX lower as well.

I like a bearish put butterfly in SPX paired with puts in VIX out to summer; I still think OTM put options in VIX are INCREDIBLY cheap.

There is a ton of opportunity to see both sides of this trade work.

Questions about that? Leave them in the comments below!

Your Only Option,

Mark Sebastian