The Option Pit VIX Traffic Light Is Green: Volatility Will Likely Go Up.

Hey Traders,

The Option Pit VIX Traffic Light is still green …

But we could trip back to yellow by tomorrow.

After a wild end to the holiday-shortened week, the VIX is taking a trip lower …

But we are not out of the woods yet.

One of the most important indicators for the Option Pit VIX Light making a big move today …

What I am watching most closely today is the VIX futures curve.

As I discussed in the Pit Report last weekend, the VIX futures curve arguably holds the most sway over the color of the VIX Traffic Light.

And VIX futures are making a nasty move today … 

The December future has fallen four points since Friday!

The purple line is where VIX futures closed on Friday, and the blue line is where we currently stand:

Right now, the curve is looking much more ‘normal’ than it was on Friday, in terms of backwardation and contango.

Here is the Friday curve:

Here is where we are today:

Now, notice we are NOT out of the woods yet.

We are back in contango (futures trading progressively higher above spot) …

But December futures are still trading below VIX spot.

However, I think we could see the VIX below 15 again within the next week or two.

How would I trade this right now?

Personally, I like the 18-strike puts … with a hedge.

What hedge?

You will have to be a member of Volatility Edge to find out.

Your Only Option,

Mark Sebastian