The Option Pit VIX Light Is Red, Volatility Will Drop.
The VIX is down 0.35, which is HUGE when we come off a weekend (remember: the weekend effect!).
Yet … despite that, we are not seeing VIX futures fall.
Something big is about to happen, and I think it could mean the opportunity to make some decent profits in the near future.
I will walk you through what is happening, and how I am going to trade it.
Ahead of The Curve
The VIX futures curve is incredibly expensive.
While the VIX is threatening to break into the 15s …
The September future is trading near 19!
We are seeing little-to-no drop in ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) and iPath Series B S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) because of this.
And VIX options are dying today with the VVIX — the VIX of the VIX — dropping.
We have the ADP National Employment Report on Wednesday, and Non-Farm Payrolls on Friday.
We also have a long weekend.
The long weekend combined with Non-Farms coming out could wallop the VIX.
With only six full trading days until expiration after Friday, the pressure on VIX futures is going to be immense.
We could see a day where the VIX is flattish or down small, and the VIX futures get CRUSHED.
The VIX September 17-strike puts (we are long these in my Volatility Edge program — call 888-872-3301 to find out more, and tell them you are from VIX Edge for a discount) are about $0.45. They are a steal at that price, as they are in the money by about $1.00 intrinsically.
As we get closer to expiration, that $2.80 spread between VIX cash and VIX September futures needs to collapse.
I suspect it will be near $1.40 by Friday, and about $1.00 (or less) the following Friday.
If VIX does not pop, that means VIX futures have to drop.
Your Only Option,