The Option Pit VIX Traffic Light is Yellow: Volatility Is Likely To Move Wildly.

Hey Traders,

While the Option Pit VIX Traffic Light is still yellow, it is getting really close to red.

If we close with the VIX nicely down on Wednesday, it COULD flip Thursday morning after Consumer Price Index (CPI) data comes out.

And I have to be honest … I am tempted to jump the gun and change it right now …

Here is why, and how I am trading it …

CPI data is going to be released on Thursday morning.

This data might even be more important than non-farm payrolls at this point.

That being said, I am really tempted to flip the Option Pit VIX Traffic Light to red …

Based on my four indicators, the light is basically red already.

Looking at trading in the VIX pits on Wednesday,  I have to say I was a bit taken aback by the one-directional nature of the trading.

Here are the top 12 VIX trades, as of midday on Wednesday:

Traders are buying puts, and put spreads in February and March.

We have seen this type of action before, but the volume is quite high today:

Halfway through the day, the VIX is already above its average daily volume …

Interestingly though, the flow is almost two-to-one puts to calls.

Could the VIX be heading for a dive lower tomorrow?

The VIX February 19-strike puts, which have traded as high as $1.00, are currently $0.15.

I would say those are a “buy.”

Your Only Option,

Mark Sebastian