Sub-20 VIX … Or Fake-Out?

Mark Sebastian

The Option Pit VIX Traffic Light Is Red: Volatility is likely to be stable or drop.

Hey Trader,

VIX ended the week at 21.33 …

It is looking more and more like it will be wanting to run to 20 soon.

But …

Will it?

Here is what I am seeing …

VIX futures are in a strong contango (futures trading progressively higher over VIX cash) …

And furthermore, VVIX – the VIX of VIX – is so close to sub-80 it can practically taste it …

So VIX is down, VIX of VIX is down …

Does this mean it will be smooth sailing from here on out?

Maybe …

Or maybe not.

Take a look at this six-month chart of VIX:

Yes, we have been steadily trending lower …

But this would not be the first time that VIX appears to finally, finally be backing down …

Only to shoot back up again.

Yes, the Fed meeting and Big Tech earnings are more or less done and dusted (for now).

But … that doesn’t mean we are out of the woods. There’s plenty of potential catalysts that could cause markets to drop and VIX to shoot sky-high again.

And as you can see … it would not be the first time.

Right now, I like the August 22-strike puts against the 27-strike calls.

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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