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Don Kaufman here. |
Let's skip the fluff and dig into something that separates the cool-headed pros from the panic-stricken amateurs: volatility. |
While the retail crowd is busy chasing meme stocks and riding every emotional wave, the real players are keeping their eyes glued to volatility like it's the market's pulse. |
The Market's Fear Gauge (And Why It Matters) |
Think of volatility like the weather—when the VIX is calm, it's sunny skies. But when the VIX spikes, it's time to grab an umbrella or, better yet, a storm shelter. |
Would you plan a beach day during a hurricane? No? Then don't trade blind to volatility. |
Last Friday, the VIX closed at 13.8. That's like saying the market took a Xanax. |
But don't get too comfy—calm waters can turn stormy faster than a bad earnings report. |
Volatility Deep Dive: The Real Deal |
Let me break this down in a way you can actually use… |
Here's how to trade smarter by understanding volatility: |
1. The Basics of VIX (And What It's Really Telling You) |
VIX under 15: The market's feeling chill, but don't be fooled—this is when complacency can trap you. VIX between 15-25: Things are heating up. Expect wider price swings and sharper moves. This is where traders thrive. (At the time of this writing, the VIX is at 15.19) VIX above 30: Chaos. At this point, your trades better have a plan, or you're just gambling.
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The Biggest VIX Spike in History (And What It Taught Us) |
Let's talk about August 5, 2024—the day the VIX went absolutely nuts. |
Pre-market, the VIX hit 66, spiking 180% in a single day—the biggest one-day jump ever. To put that into perspective, this spike blew past the chaos of the 2008 Financial Crisis and even the COVID crash of March 2020. But here's the kicker: by the time the day ended, the VIX had settled back down to 39, proving that not all spikes are created equal.
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What Drove the Madness? |
Low Liquidity Pre-Market: With trading volume 80x lower than regular hours, dealers widened their bid-ask spreads on options. This wasn't panic—it was market mechanics. Out-of-the-Money (OTM) Put Options: These accounted for 86% of the spike. Why? Because the VIX calculation gives more weight to OTM puts, and demand for protection skyrocketed. Market Maker Positioning: Dealers were already sitting on huge short-term put positions, so when Japanese markets tanked 12% overnight, they widened spreads to avoid taking on more risk.
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2. Volatility and Options Pricing: The Real Connection |
Here's where things get juicy: |
High volatility inflates option premiums. That's great if you're selling options, but it can crush you if you're overpaying for calls or puts. When volatility drops (a.k.a. "vol crush"), option prices collapse faster than a bad IPO.
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Example:
Let's say you bought a call on Tesla during a VIX spike at 30. Even if the stock moves up, the falling VIX can potentially wipe out your option's value. |
3. Time-of-Day Volatility Patterns |
The market has a rhythm, just like your daily coffee ritual: |
Morning session: Volatility spikes as the big money positions itself. This is like your first caffeine jolt—sharp and fast. Mid-day lull: Things calm down as traders grab lunch and let the algos take over. Last hour: Volatility ramps up again, like a second espresso shot before the close.
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Tools of the Trade |
Don't show up to the volatility game unarmed. That's like walking into a casino without knowing the rules. Use these tools to stay ahead: |
Implied Volatility (IV) Charts: Know when options are overpriced. If IV is way above its historical average, it's time to sell, not buy. IV Rank/Percentile: This tells you if volatility is high or low relative to its history. VIX Futures: Watch how the futures curve is behaving (is it in contango or backwardation?). It's like reading the market's mood swings. Volume-Weighted Average Price (VWAP): Combine this with volatility to spot smart entry points.
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The Big Picture: Putting It All Together |
When you see the VIX move, don't just shrug it off. Ask yourself these questions before making a trade: |
How does the current VIX compare to its 30-day average? Are options premiums inflated or cheap? What's volatility telling me about the market's risk appetite? Is this a high-probability setup, or am I chasing noise?
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How the Cookie Crumbles |
Trading without understanding volatility is like driving on an icy road with bald tires. Sure, you might get lucky for a while, but eventually, you'll crash—and it'll be expensive. |
Take last week as an example: the VIX was sitting low, and the market looked calm. But low volatility doesn't mean no risk—hidden dangers can still catch you off guard. |
Remember, volatility isn't the enemy—it's the ultimate trading opportunity if you know how to use it. |
Don't Let Another Day Go By Without Mastering Volatility. |
For just $7, unlock 30 days of TheoTrade—the strategies, tools, and support you need to navigate any market condition. |
Click here to take control of your trading today. |
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🚨 Over 80% of Spots Filled: Join The $1M Challenge Before It's Too Late! 🚨 |
Alright, traders—this is the moment. Gianni Di Poce and I have teamed up to bring you The $1M Challenge—a bold, no-nonsense plan to turn $250,000 into $1,250,000 over the next 3 years. |
What's the strategy? Simple: |
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We're taking advantage of what could be the biggest wealth-building window the market has seen in decades. |
Why You Can't Afford to Wait |
Let me be straight with you—this isn't one of those "open forever" deals. We're capping The $1M Challenge at 50 traders, and as of now, over 80% of the spots are already gone. |
If you've been sitting on the sidelines, this is your chance to get in the game. |
Missed the Live Session? |
No worries—we've made the full replay available, but only for a limited time. Once the spots are filled, that's it. No second chances, no "waitlist," nothing. |
Why Now Is the Time |
The market is entering what we're calling a Golden Era of Trading, and the opportunities are everywhere: |
A.I., Crypto, and Energy Booms: Massive momentum is building. Trade Wars and Volatility: These are opening up high-reward setups for traders who know how to spot them. The Fed Pivot: Historic sector rotations are creating once-in-a-decade opportunities.
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This is the kind of market where fortunes are made—but only if you've got the tools to play it right. |
What You're Getting |
When you join The $1M Challenge, you're not just signing up for some "course"—you're stepping into a high-performance trading plan designed to maximize returns, minimize risk, and capitalize on market volatility. |
Time Is Running Out |
Let me put it like this: this isn't just another opportunity—it's the opportunity. With over 80% of spots filled, the rest won't last long. |
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This is moving faster than a breakout trade—and you don't want to be the one stuck watching from the sidelines. |
To your success,
Don Kaufman |
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