Hey Trader,
The VIX may “only” technically be down about 0.3 points to start the week …
But in reality, volatility is down quite a bit more than that.
Is it time to get short?
Here is your answer.
Thanks to the Weekend Effect (which causes VIX to be artificially inflated on Mondays), though the VIX may only be down a fraction of a point …
Weekend-adjusted, it is actually down more than one full point!
Take a look at VIX futures …
They have dropped dramatically on the day.
2x Long VIX Futures ETF Fund (Ticker: UVIX) – which is the new double-long iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) – is down 7%!
That is pretty big.
So is it time to get short?
I would say yes, especially ahead of Easter weekend.
In the weeks ahead, we could see vol drop as low as 17 … making cheap puts near that strike an attractive potential play.
The only real potential vol I can see ahead of us is the release of the Fed meeting minutes on Wednesday.
Traders will be looking at the minutes closely, as it will give key information about who is voting for what …
And traders will want any clues they can get about potential tapering measures the Fed is looking to put into place.
A “taper tantrum” is a real possibility once the Fed begins tapering efforts in earnest.
But … in the meantime …
I think short volatility plays are the way to go … at least for the next few weeks.
Your Only Option,
Mark Sebastian