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The S&P 500 had its worst day in three weeks as it drifted lower by more than 0.5%. That number isn’t necessarily anything to write home about, but I’m seeing some things happening behind the scenes that, potentially, are ominous.
Last week I gave you a signal from the volatility markets that we could be in for a 5% to 10% correction on the S&P 500. Sure enough, on Friday I monitored a surge in VIX Jan 22 2025 $20 calls. In other words, there’s a big bet on volatility out there.
At the same time, volatility skew (the difference in volatility between at-, in-, and out-of-the money options) is near record highs. The three-month VIX is rising significantly relative to the 30-day VIX.
That means risk levels are rising significantly.
Today, I saw more significant call buying – more than six times the five-day average.
Tonight, we’ll look at today’s VIX trade and see what it means for your portfolio…
