What’s A Trader To Do In November?

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

Hey Traders,

The VIX October expiration happened on Wednesday, settling at a post pandemic low of 15.35.

Now that November is the front month …

With the VIX in the 15’s …

What is a trader to do?

Here is the plan …

With October settling at a post pandemic low of 15.35, we move on to November.

October was unique in that it was the first time in a long time that cheap, out-of-the-money puts,  or even near-the-money puts, settled IN the money …

Can the same thing happen in November?

There is some work to do.

The November future is currently VERY expensive:

The spread between the cash and the future sits at about 4 points.

That is REALLY wide.

With the SKEW index normal, we could see VIX stay here for a while.

Even with a small sell-off, it could be hard for VIX to truly pop.

So what is a trader to do?

I can tell you what many traders were doing…

Buying the November 15-strike puts for $0.10.

Check out the volume on the 15 and 16-strike puts in November:

On a busy VIX day, the most active strikes were cheap puts … interesting.

That said, I see more value in the 17s.

The 17 puts went for $0.55.

This means that the premium is more than $1.00 in-the-money relative to the cash.

The 15s are actually out-of-the-money, and we have settled below 16 ONCE. 


At $0.55, the 17-strike puts are relatively cheap and nicely in the money …

I am a buyer.

Your Only Option,

Mark Sebastian

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