What savvy traders are betting now

Before I'm telling you what savvy traders are betting their money, first let's see an interesting chart, Fear & Greed (F/G) indicators. There are many things we can learn from this simple chart but let me point out two easy ones that are standing out: See the yellow highlighted parts, one for late December and the other for now. Are they just like a mirror image exactly in an opposite end? Yes, they are! And then, watch for the extreme level, 20 (extreme fear) vs 80 (extreme greed). Notice what happens each time these two numbers are hit? Yes, they usually turn around and either jump or crash. So right now we are approaching 80 with a spitting distance, a drastic reversal of the sentiment with an extreme greed mood as opposed to the extreme fear back in Dec. If the historical pattern repeats itself (and there is no reason it won't), we may see a reversal of the mood pretty soon. This is exactly what those savvy traders are betting now.

So how do I know, you may ask. Well, we have another good clue to see via VIX call/put options. Simply put, the VIX (the volatility index) has an European style of options, i.e. they can only be excised on the expiration date, not before which is the case for the American style. With that, the option prices for VIX can send us a good signal what the traders are really betting. Right now, traders are betting extremely skewed to the VIX calls than puts. For the next week or two, the VIX calls are 7-10 times more expensive than puts, something like $3 for calls vs $0.3 for puts for at the money calls/puts. In other words, there is a great chance that VIX will jump in the next week or so. If so, watch for a quick fall of the F/G indicator as well as the stock markets.