Slow Grinding Movement Lower for VIX

Mark Sebastian

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

Hey Traders,

Friday was ugly for the market. (And its down slightly today, as well.)

After appearing to surge higher, the S&P 500 dove lower briefly testing 3900 … before finally closing within a hair of 3925.

The VIX on the other hand … yawned.

VIX closed the day down .09 points.

The curve is still in backwardation: VIX futures are trading below spot VIX.

…

In fact, week over week … the VIX futures curve FELL!

So what happens next?

We are potentially entering another slow grinding move lower for the SPX, one that will have up and down days, but slowly grind lower.

I think we are set to test 3750 and then from there, potentially 3500 …

We get to 3500, it might be time to buy.

For now though … I like short VIX and short SPX as a pair.

I would buy put options in September, October, and November and hedge them with near-term puts in the S&P 500.

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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