The Option Pit VIX Light Is Yellow: Volatility Is Going To Move.
The market is now about even with where it ended on Thursday, July 15th.
But that does not mean that all is well.
There’s a reason the Option Pit VIX Traffic Light is still yellow.
Here is what that reason is, and what to do …
Less than one week ago, the S&P 500 (Ticker: SPX) was about where it stands now.
However in that time, the SPX has seen some serious movement.
This might be the reason that despite the S&P 500 recovering, the VIX has not.
Take a look at the change in the VIX futures curve:
The VIX itself is higher by about a point.
But more importantly, the VIX futures curve has totally shifted higher.
Until the futures curve falls back even with its old levels, it’s hard to argue that a move back to a red light makes sense.
Now, that said, this doesn’t mean I don’t want to fade volatility … I do …
And I have been playing it this whole time (you can see some of those trades here.)
I just can’t go in full force until things fully normalize.
In the meantime, I like August strangles.
Take a look at current option prices:
I can buy the August 18-strike puts and buy the August 20-25-strike call spread as a package for about $2.
I can make money trading off of that spread.
Your Only Option,