Trading The VIX


I finally took the majority of profits near our $30 target. $27.00-$27.50, to be precise. Suppose you have been following along on our Twitter. In that case, you will know we have not done much since August because our high conviction on VIX is paying us out with relatively little risk.

As you can see from the chart, just holding the Vix pays off. If you did any micromanaging, your returns could have quickly skyrocketed from the 37% captured since August 1st.

So here concludes our volatility trade. (For now, we will enter again to capture any more upside when a signal presents itself.) Also, below is a recap of what I learned that might help others.

  •  Ignore Voltwit, aka volatility Twitter. These guys overcomplicate and think fancy systems and models are doing themselves a favor.
  • Vix is not a fast trade; expect to scale in and out of your positions or prepare to hold.
  • Great hedge if you are long any exposure in the market, and you won’t feel pressured like you do when shorting.
  • The returns are pretty good, 37%, on an easy support hold when it reaches our level of $20. It is a futures contract, so do the math on how scalable it is on your capital. It is liquid.
  • Depending on the market cycle, could be any easy trade buy and sell
  • Retraces are very common; expect to watch your profit be cut in half to wait for the ebb and flow of the market as it gradually moves in your favor.
  • Unless you are sure, do not allow drawdown to build up. You do not want to get stuck; it should be a stress-free swing trade.

Feel free to check out our trading suite products. These are trader tools custom designed by my team and me and will support more development and experiments.