The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.

Hey Traders,

If we make it through mid-cap bank earnings, my light is going to move to red.

VIX closed 16.95, below 17, for the first time in a long time.

The S&P 500 rallied a whopping 13 points to close above 4150, again the first time in a long time.

But does this mean it is time to jump on board a long volatility play?

Let’s circle back to that in a second.

Take a look at SPX realized volatility:

It’s crashing.

Average True Range … how much the SPX is moving bringing in Realized Volatility:

The trailing 14 days are the lowest in the last year.

With HV 10 and 20 below 11 and 14 respectively, a 16.95 VIX is pretty darn fair, if not expensive.

I think we could be entering a new volatility regime for the next few weeks, especially if we get through mid-cap bank earnings and April Expiration (which is Friday) unscathed.

I continue to think the long term trajectory for VIX is 12.

That said, we are going to have a period of time in the next few months that no one sees coming that is going to shake markets to the core.

I’ll be explaining what that is on Thursday … make sure you join.

Questions about that? Comment below!

Your Only Option,

Mark Sebastian