What Might the Beaten Down VVIX Be Suggesting?

02/24/2016 8:00 am EST

Focus: OPTIONS

Mark Sebastian

Founder, OptionPit.com

In the last three months, the VVIX has not been as low as it is now. Previous times it has been near this level consistently…the S&P has rallied, so options trader Mark Sebastian of OptionPit.com takes to the charts to deduce what this might suggest and shares the options trade he’s considering as a result.

One things that has been consistent over the last few months has been a consistently high VVIX.  And with the high VVIX has come a whippy S&P 500 (SPX).  Even at the highs of the year, the VVIX was into the 90s.   Now though, the VIX is back below 19 and the SPX is above 1945. In the last three months VVIX has not been this low. The times it has been near here consistently...the S&P has rallied.

chart
Click to Enlarge

Now that VVIX is near 86, it’s possible the S&P 500 could have a small run higher here and the VIX might threaten some of the lows from December somewhere around 17-18% or so. Additionally, VIX is in a deep contango which is also bullish the market.

To see the options trade I’m considering now, click here…

By Mark Sebastian, Blogger and Contributor, OptionPit.com

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