Time To Fade Vol Or Brace For The Worst?

Mark Sebastian

The Option Pit VIX Traffic Light Is Red: Volatility Is Likely To Be Stable or Drop.

Hey Traders,

The Option Pit VIX Traffic Light remains red …

And we finally saw the VIX close back below 20.

But is this quiet vol too good to be true?

Should we be bracing for an upset … or is it time to bring out the “fade the vol” trades?

Well, saw April futures expire on Wednesday …

The VIX futures curve is in a lovely contango …

And the current front-month future is actually trading at a normal premium to spot VIX for once!

So far so good.

In fact, in the days ahead, we could see VIX approach 18 …

Especially if we continue to see some upside out of markets.

We’re looking at some good trading opportunities right now.

ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) is sitting at around $11.80 …

The 11-strike puts for tomorrow are $0.10 …

I might be a buyer.

What’s more, iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) is still trading at a huge premium to where it should be …

I would also be a buyer of put flies …

In fact, I may already have a few on in my Volatility Edge program …

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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