This VIX Trade Could Double

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

Hey Traders,


Leading into Wednesday, the VIX was up four days in a row.


How long can it last?


Is this leading to THE sell off?


The VIX touched into the 18’s on Tuesday …


The S&P 500 (Ticker: SPX) is down again on Wednesday …


But so is the VIX.


Why?


It’s the CBOE SKEW Index (Ticker: SKEW), which indicates IV (and demand) for crash-protection puts in the SPX.


After blowing higher over the last week, the SKEW Index is starting to fall again:



SKEW is falling because traders are unloading protection.


It appears that the rally in the VIX might be somewhat short lived:



If this is the peak in the VIX, heading into expiration next week, we might see volatility really fall off.


I am a $0.05 or $0.10 buyer of the VIX 15 puts; I think they could double.


Your Only Option,

Mark Sebastian

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