The VIX Trades I’m Watching This Week

The Option Pit VIX Light Is Red, Volatility Will Drop.


Hey Traders,


Coming off a long weekend, and heading into its final six days of trading before the next VIX futures expiration, the VIX is finally starting to normalize …


A little.


The VIX has been so out of whack for so long that it has come to making trades in the final week of options expirations to really clean up.


I see a few trades that really have me excited for this week.


In fact I did one today …


Here is what I am looking at, and a few ideas …


Coming off a long weekend, we expect the VIX to be up …


This is called the “weekend effect.”


The futures, which are a forward contract, do not have the weekend effect.


This is why the VIX can be up 1.15, and the futures barely move:



But over the course of this week, I expect the VIX to drop, and with only a few days until September expiration, I think VIX futures will have to follow.


With the VIX at 17.64 on a day the S&P 500 (Ticker: SPX) is down marginally and the Nasdaq 100 (Ticker: NDX) is up, there are plenty of trades to pounce on today that I would expect to have closed by Friday.


I still think the 15 puts for $0.05 are cheap, but take a look at the rest of the September options:



On pretty decent volume, traders are buying the 16-strike puts, the 17-strike puts, and the 18-strike puts.


I like owning the 16s for $0.05. That is WAY too cheap; these were over $0.25 last week.


The 17s are also cheap at $0.30. I would NOT mind owning those (and actually, I do own a bunch).


If you are worried about a pop, the 20-25 call spread only costs about $0.50. That is a nice hedge on a ratio of about 4-to-1 puts to calls.


Don’t forget, just two days from now, on Thursday at 7 p.m. ET, I’ll be going live in a no-cost special event to reveal how YOU can take your trading to the next level by doing this ONE thing like the pros.


Register here, and I’ll see you Thursday at 7 p.m. ET!


Your Only Option,


Mark Sebastian

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.