Three-peat: Is the VIX Done with 20?

The Option VIX Light Is Red, and Volatility Is Likely to Drop.


Hey Traders,


That is three days in a row under 20 for VIX.


Wednesday’s close of 19.23 is the lowest for the VIX since *checks notes* Feb. 21, 2020.


That’s the day before the Covid meltdown started.



That’s right … we are getting to pre-pandemic levels in the VIX.


I think an 18 VIX is next, followed then by a slow grind back to 12.


And a few institutional buyers agree with me.


Today we saw action on the April 20, 19, 18 and 17 puts …


But the biggest trade of the day took place in July.


A customer bought 10,000 of the VIX July 15 puts for .07



I LOVE this play!


The buyer is spending $70,000 to bet that by July we will be back to a normal VIX (a VIX sub-15).

If the VIX gets to 13 or 14,  the customer is in line to turn $70,000 into $1 or  $2 million.


That, friends, is not a bad risk/reward.


What makes this trade work well in a product like VIX — and what this customer is betting on — is reversion to the mean.


The VIX has been high for north of a year. (And it seems like even longer than that.)


The MODE for the VIX — the whole number it trades the most in — is 12.


With July four months away, and given the current trends, VIX could EASILY get to those levels by the mid-summer doldrums.


Here Little Piggyback


This is a trade I might be interested in piggybacking.


An alternative with better odds and a slightly higher cost would be the July 17 puts for .25.


It costs a touch more — but has an easier time winning because it is closer to the money.


The Option VIX Light Is Red, and I expect you to DIE, MR. VOL!!


Your Only Option,


Mark Sebastian

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