This Short Vol Trade Can Still Work

The Option Pit VIX Traffic Light is Red: Volatility Is Likely to Drop.

Hey Traders, 


Well, the easy money has been made …


The 17-strike puts I told you to buy for $0.40 are now worth $1.15.


The 16-strike puts I said to buy for $0.25 are worth $0.55


The 15-strike puts I said to buy for $0.10 are now trading $0.25.


So the question now is …


What next?


The easy money has been made.


Just about every put that I had in my inventory is up more than 100%.


Whether it’s ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) or VIX, owning puts PAID.


But now that the VIX is 15.10, and as I stated …


The EASY money has been made on short volatility.


Is there a short volatility trade that will work?


The answer is YES!


Volatility did get SMASHED on Wednesday, but the curve itself actually widened a touch:



Yesterday, the spread between the cash and the future was about 1.60. Now with the vol crush, it’s about 2.00 points.


Do I still think there is money to be made in November VIX options? 


Yes …


But there are better trades now.


Let’s start with UVXY.


UVXY got destroyed on Wednesday, dropping over 5.50%


But with the curve in a steep contango (futures trading progressively higher over cash), does anyone think the November 14-strike puts for $0.70 seem cheap?


I do.


When it comes to VIX itself, I would take a gander at December options.


December futures are trading 4.70 points above the cash.


As November approaches expiration, that is going to put a lot of pressure on VIX.


The 17-strike puts in December are actually CHEAPER than the 17-strike puts in November.


Why?


Because one has an underlying of 17.20, the other of 19.77.


December is the place to make money.


But …


There are even better trades than the ones I just laid out.


Want to know what they are? 


You have to be a member of Volatility Edge.


Your Only Option,

Mark Sebastian

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