Last year, the VIX elevated nicely four times, one of which was what I call a spike. If you happened to be in the game trading the VIX, you may have made a lot of money, especially during April when tariffs were announced and the VIX closed at $52.33 and momentarily peeked over $60. History is usually an excellent indicator, therefore, moving forward for 2026 volatility, plan getting two if not four VIX moves upward.
The chart below shows those four elevations. The first one was in late December of 2024 when the VIX moved up to $27.62. On or about 3-10-25, it moved up again to $27.86. The big move one was in early April when the VIX spiked to $52.33. Finally, we had one more noteworthy move in mid-October, moving up to $25.31. Being in the game in 2025, one could have made a killing trading the VIX.
That being said, how can one make money this year trading the VIX? For starters, get to know the VIX. The best educational resource for that is the CBOE (Chicago Board of Options Exchange) using this URL . . . https://www.cboe.com/tradable-products/vix/Next, I’ll detail three tips below that I have found to be helpful when trading the VIX.
- First, decide on how much you can afford to lose when trading VIX options.
- Next, choose a conservative (not too greedy) trading range and build a model to buy and sell the VIX.
- Finally, follow the VIX in “pretend mode” using Charles Schwab’s Think or Swim with this link: https://www.schwab.com/trading/thinkorswim/paper-trading/ Then calculate how much you might have made with your VIX trades; rinse and repeat.
I have a pretty good win-rate when trading the VIX and here’s what I’ve found to be successful . . .
- I trade no more than $500 per month on the VIX.
- After a few years of trading the VIX, I have settled on the following method.
- I buy calls when the VIX is below $15 and I sell those calls when the VIX moves over $21 unless an overnight spike happens where we ride the spike upward.
- To maximize my gains, I focus on the 30-45 DTE (days to expiration) at a strike price of $25. With this model, I can usually afford to buy 10 or more VIX contracts, the equivalent of leveraging 1,000 VIX shares.
- If we happen to get a huge spike like the one in April of 2025, one could more than 10-fold an initial investment.
- Finally, should the above happen, we immediately bank half or more of the gains and then decide on how much to reinvest in VIX puts for the ride back down. Note: although it is not a guarantee, mean reversion (what goes up must come down) almost always happens as one can see in our accompanying chart.
RISK – Trading options may result in potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the options markets. Do NOT trade with money you can’t afford to lose.
