Hey Traders,
Well, that didn’t last long …
After two days of the VIX being firm, and the market going up …
The VIX kind of died on Wednesday.
This sets up a really nice trade for Thursday …
After two days of the VIX going up with the S&P 500, the VIX went down on Wednesday.
The correlation break that I was a bit worried about appears to no have legs:
The S&P 500 was up a little under 6 points …
While the VIX was down 0.19 points to 15.83 …
But I think this might just be the beginning …
We are heading into a long weekend and, much to my surprise, up until Wednesday the VIX itself had been pretty firm.
That appears to be over …
While we still have non-farm payrolls on Friday, I think we are looking at a full on vol crush on Thursday and likely Friday …
I see a full point of downside from here …
With that move, the VIX futures are likely to get beat badly.
We are still trading above Friday’s lows (the red line):
However, we are going to see the curve fall below last Friday’s levels on July 2nd, and potentially hit 17.
This will put huge downside pressure on ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) and July VIX options.
The VIX 17-strike puts closed at $1.10, $0.20 below their high.
I think they are going to $1.40-$1.50 by Friday, and I will be putting out a buy on Thursday morning.
Your Only Option
Mark Sebastian