Are the Markets Headed for Another Huge Drop?

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Feb. 20 (Bloomberg) –- Swan Wealth Advisors Director of Trading & Investments Mark Sebastian and Bloomberg’s Matt Miller discuss the state of the markets and investing in volatility in “On The Markets” on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

What do you make of the vix position?

Does this mean people expect a fall, or are being more cautious?

They are definitely being more cautious.

I will tell you, yesterday we were down 12 points and the vxi gained -- vix gained 1.6 points.

Today we are up 11 and we give back less than half of that on the vix.

When we see the market rally and volatility rally with it, that is almost always a sign of a near-term top.

The way i am looking at the market right now, we may test the all-time high at 1848. i don't think we will break it.

If we do, for a very short time.

I think there is something very quickly coming up that is going to amount to some sort of drop.

Maybe the 100-day moving average we had a couple weeks ago.

So you don't recommend telling volatility.

You want to buy?

If i was looking at the market, the types of trades i like right now are things like one by two call spreads.

Definitely not short on the downside.

I would not be a put seller here . i might be willing to sell calls.

Traits that make sense are collaring, buying and out of money put and selling and out of money call.

Full disclosure, that is the position we have at swan wealth.

Let me ask you about the situation in ukraine.

Does that kind of thing also push vix futures up, regardless of their relationship to the s&p index?

That is kind of an outside event.

That can pull the vix higher.

I don't think that is happening.

One of the sayings is we take the elevator down and the stairs up.

On this last selloff, we took the elevator down and the elevator back up.

I am wondering whether we sold off so fast that the elevator bounced off the bottom and flew us right back to where we were.

We are ready -- getting ready to let gravity take its course.

He way the market is shaping up, i do not like what i'm looking at.

The vix is still under 15. relatively speaking, insurance prices are not that expensive.

If i was straight out long i would love to hedge here through a s&p 500 put or some long v ix way.

Thanks so much for joining

This text has been automatically generated. It may not be 100% accurate.

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