The Option Pit VIX Light Is Red, And Volatility Is Likely To Drop.
Hey Traders,
The VIX closed down on the day,
But not all the way down at the lows …
Was it because the S&P 500 went negative on the day briefly, before pulling up to close higher?
Nope …
Traders,
I had to see it to believe it …
But the VIX movement today had very little to do with the S&P 500.
Yes, the S&P 500 did not close near the highs, and was even briefly down …
But that is NOT what drove the VIX …
It seems it is meme stocks driving VIX higher!
Check out this one-minute chart. On the top is the VIX, and the bottom is AMC Entertainment (Ticker: AMC) …
When AMC made its wild run higher mid-day was when the VIX started to run hot …
Once AMC calmed down, so did the VIX.
We saw something similar with GameStop (Ticker: GME) back in February …
In that case, once GME sold off, so did the VIX …
I think we could see the same thing this time around.
AMC could run higher for another day or two (although it kind of feels like Thursday is setting up to be peak meme) …
As AMC plays out, I expect VIX to be firm — maybe not shoot higher, but at least have trouble really selling off.
But once the gas runs out of AMC, it’s “look out below!” for both AMC and the VIX.
Take a look at VIX vs GME in February and tell me I am wrong:
When this meme runs out of steam, the VIX is going to plummet …
In the ‘meme’ time, expect a firm VIX …
Your Only Option,
Mark Sebastian