RIP To The VIX

Mark Sebastian

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

The S&P 500 gained 29 points on Tuesday, after being up 100 at one time.

Yet 4,100 proved to be a hard line in the sand ahead of the FOMC meeting.

So the momentum play failed on Tuesday – for the S&P.

VIX, on the other hand, got smoked.

VIX futures had a huge drop:

December and January took it in the chin.

The curve as it stands:

Still in contango with VIX over December.

There are some big implications here…

Yet again the market is looking for a big move out of the S&P 500.

And yet again the straddle price is big.

They are predicting a move of almost 2% tomorrow.

When the FOMC comes out, VIX is likely to drop again and the market is going to make a move.

Unlike yesterday, I would just stay away from S&P options and stick to VIX. I would get short Jan.

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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