BY MARK SEBASTIAN
August 8, 2023
Hey Traders,
Yesterday, the S&P 500 closed up 40.41 points to close the day at 4518.41.
The VIX closed down on the day nicely settling at 15.77. Remember, if we consider weekend adjustment, Monday was a pretty decent down day.
All is not right though …for bulls, yes, the market had a nice rebound.
But here’s the thing: even with the drop, the VIX was not buying the rally.
“Wait,” you might say, “VIX futures were down…”
Yes, but they were trading on top of VIX itself…despite having more than a week to expire.
This is a sign of a market that is walking on eggshells.
Take a look at the curve:
VIX futures are still sitting on top of the VIX index.
And the September futures are less than 2 points higher than the VIX index…
Despite the relatively low VIX this is almost always a sign that there is a move coming.
The spread between SPX realized vs implied is the highest it has been since November of last year…
And we know how that went:
So what do you do?
In my Trading Desk service, we are trading strangles for some pretty nice dollars … that will continue to work.
It can be hedged with VIX options.
Not a member of my Trading Desk service? Send us an email at [email protected]. If you reach out and say you read about this post, they have a deal for you for the next quarter ahead.
Questions about anything? Leave a comment below!
Your only option,
Mark Sebastian
Mark Sebastian
Founder & CEO, Option Pit
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