The Option Pit VIX Traffic Light Is Green: Volatility Will Likely Go Up.
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.
You will have to be a member of Volatility Edge to find out.
Your Only Option,