The Lone VIX Holdout

The Option Pit VIX Light Is Red, And Volatility Will Drop.

Hey Traders,

It was short, and not that sweet …

The Option Pit VIX Traffic Light is back to red, after a brief flip to yellow.

On Thursday, we got some excitement in the markets … and the VIX gapped higher to hit 20 for the first time since June 21.

But come Friday morning, and we’re looking at calm waters again, and the VIX is back to 16.

And of course, the markets are back to green …

Yesterday’s S&P 500 (Ticker: SPX) gap down has been filled … and it seems like we are back to “business as usual” in spite of concerns about slowing global growth …

Of course, yesterday’s VIX Light prediction did technically come true …

Remember, a yellow light doesn’t mean volatility is necessarily heading higher …

It just means volatility will move – and the move could be in either direction.

So after a gap higher yesterday, Friday morning the VIX gapped lower, back to its midweek levels.

And my VIX Light sub-indicators are all back to red, with one exception …

The only yellow light indicator remaining is VIX realized volatility:

I was a little surprised to see the 20-day did manage to stay above the 10-day. This is one reason why comparing different terms of realized volatility is important … it can help smooth out the trends, so you can get an idea of whether or not a sudden move higher or lower is a quick spike, or the start of a larger trend. 

However, I do expect to see realized vol fall off on Monday, since things have calmed back down today.

The VIX futures curve is back to a steep contango, with futures prices higher than spot prices:

The VVIX is also dropping. The VVIX is like the VIX of the VIX, so it measures the implied volatility (IV) of VIX options.

So it seems like options traders aren’t expecting more big moves any time soon …

For the most part, it looks like we’re pretty much back to where we were, with Thursday in our rearview …

I’m glad I was able to take advantage of Thursday’s excitement, and make some trades …

I told you one move I was looking to make yesterday, and we do post some of our trading records here

But if you want my Volatility Edge trades, you’re going to have to be a member

Your Only Option,

Mark Sebastian

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.