The Option Pit VIX Traffic Light Is Red: Volatility Will Drop.
The VIX is now back below 20 …
I think there is a good chance we will make a run at a new all-time high in the S&P 500 (Ticker: SPX).
More importantly, there are really good ways to play volatility.
Even better? Options are on sale!
The VVIX is the VIX of VIX options.
It tells us how expensive VIX options are at any given moment …
It has gotten demolished over the last few days:
Despite the VIX still being right near 18, options have been crushed by traders.
VVIX is now threatening to close at a three-month low, and potentially could make a run below 100.
Now that we have seen VVIX fall, and the Option Pit VIX Traffic Light is red, long VIX options are extremely favorable.
With VIX at 18 and falling, the October 18-strike puts have changed hands about 50,000 times.
I can see why. At a cost of only $0.75, these are cheap.
The low for the month in VIX is in the 15s. If it can get there again, these puts will double.
We bought some of these for $0.50 earlier in the week; they are up 50% and I am not closing because I think these will go to $1.00.
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