The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.
The S&P 500 boomed higher on Thursday, closing up 60.55 points. That’s off the highs, but still way up…
While the S&P 500 had a good day, VIX shorts did not.
The VIX rallied, running over 19 at one point and closing at 18.73.
Why?
There are a few reasons…
- Earnings: AAPL, GOOGL, AMZN – a huge portion of the S&P 500 – reported on Thursday night (in mostly bad fashion)
- Non farm-payrolls are this morning
- The S&P 500 move was the equivalent of about a 22 VIX
Those are all very standard reasons for thinking VIX up and SPX up …
But the futures moved strongly, too.
Check out the S&P 500 futures with the VIX futures on Thursday:
While I think we might be in a new pattern for the S&P 500, near-term … we might be a touch over extended.
I also continue to think vol, despite the big move on Thursday, is too expensive … so I would short both of them.
Buying UVIX 18 puts and SPX puts as a pair looks very promising.
Your Only Option,
Mark Sebastian