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.


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

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Your email address will not be published.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.