VIX To 20, Or Time To Fade?

The Option Pit VIX Traffic Light is Red: Volatility Is Likely to Drop.

Hey Traders,


The market took a turn yesterday, and volatility caught a huge bid …


But something else has been happening under the radar.


If you miss it, you’ll regret it.


Here is what I am seeing …


The VIX caught a nice bid on that S&P 500 (Ticker: SPX) turn around.


But does this mean the VIX is heading back to 20, or is this a chance to fade?


Take a look at open interest on the VIX November 15-strike puts:



Over the last few weeks, trading has ballooned on the November 15-strike puts.


Open interest now stands at over 300,000 contracts.


Why?


There is a lot of speculation VIX could tumble …


Remember, the CBOE SKEW Index (Ticker: SKEW) is still pretty flat, and the market is near an all-time high.


Most of the biggest earnings are coming to an end by Thursday night.


There are real reasons volatility could collapse.


But what about inflation, rates, supply chains?


I fear we could see a real pop if energy prices spike again, but outside of that, most of the above I listed are known quantities …


And therefore not drivers for VIX.


Your Only Option,

Mark Sebastian

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