The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.
Hey Traders,
By any stretch of the imagination, Tuesday was an inside day.
From high to low, the S&P 500 had about a 22 point range.
But that doesn’t tell the whole story …
The S&P 500 actually looked like it wanted to take off until the final few minutes of the day.
At which point it died incredibly fast:
The market worked all day to rally and then gave up in a few minutes – proof the rally was built on algos, not real buying.
The point is Tuesday’s movement did not involve people.
But you know what does?
CPI expectation!
CPI is why the algo’s let go of the rally they pressed so hard to make happen.
While the IV is certainly juicier for Wednesday than it was on Tuesday, the expectations are still relatively light.
SPX is pricing in about a 39-point move.
That’s less than 1%.
The pricing seems low, and it’s a sign that an out-of-bounds number could cause chaos in the market.
I would be looking to play that out-of-bounds move today. It’s been way too long since we had one.
We open down decently, play for something big – a rally, same deal.
As I keep saying … options seem way too cheap.
Questions about that? Comment below!
Your Only Option,
Mark Sebastian