The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to swing wildly

As we said would happen…

A really bad CPI number caused the SPX to tank and the VIX to pop.

That said, the VIX really did not rally THAT MUCH.

A move of 3.40 points might seem like a lot,  but considering the 4.32% move in the S&P 500,  VIX was muted.

Even so, it managed to enter partial backwardation:

That number caught a lot of people off guard…

And I am here to tell you, it is probably not over.

AAPL dropped almost 6%, AMZN more than 7%, GLD – not safe! It fell 1.30%.

There was almost nowhere to hide. Except volatility.

So what’s next?

Probably more pain…

In one day, the S&P 500 swallowed up four days of strong gains.

The next move is probably toward 3750 …

Then, who knows … 3500?

If we break the low from Sept. 6, which was 3886,  we are going to make a serious run lower …

Do not play any dead-cat bounce. We will not run higher til we open down big one more time.

I would buy puts in SPX and buy puts in VIX as a pair (buying nearer dated in SPX and buying longer dated (October) in VIX).

Today at 11 a.m. ET, for Option Pit Clients I am hosting an emergency all-hands on deck trading session.

If you want to join, you have to be a member of any Option Pit service. Had an eye on something? Now is the time! Call my Customer Care Team at 1-888-872-3301 with any questions before 11 a.m. today

Your Only Option,

Mark Sebastian