Was Yesterday’s Market Pop A One-Off?

Mark Sebastian

The Option Pit VIX Traffic Light Is Green: Volatility Could Go Up.

Hey Trader,

On Tuesday the market had a nice relief rally …

But is that all there is to the market moving higher, one day pop and then right back to selling?

The answer might be no. Here’s why …

The VIX futures curve flattened up considerably on Tuesday:

While the VIX is still trading at a premium to the futures, the futures themselves have backed off quite a bit, and are now flat as opposed to backward.

In addition, traders are unloading VIX options.

Check out VVIX (the VIX of VIX):

Vol of vol has backed off noticeably; this signals that the fireworks we have seen in VIX could be dissipating, and the market is starting to digest Russia-Ukraine for what it is …

Unlikely to be a war, and more of a political process.

While we are not out of the woods, the big drop in VVIX has me thinking the Option Pit VIX Traffic Light could be flashing yellow by the end of the day.

If things resolve themselves overseas, VIX could be back to 18 in a flash.

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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