This is a simple trading system of my own creation, although a Google search will find various and sundry variations of the theme. In its most basic iteration, the system monitors a series of 3 or more red Heikin-Ashi candles, waiting for a doji or first green candle (blue candles in my red-green compromised vision & charts), an indication a reversal of trend in VIX from downward to upward. The goal is to catch a rally early enough to buy cheap calls for a spike in volatility, measured from days to weeks, seeking a 3X to 10X appreciation in out-of-the-money calls. Year-to-date, I have identified over a dozen such instances, with an average return from entry to highest VIX print of +65%. Worth taking a flyer on some VIX calls? Let's take a look at the past few months: Yes, that's a fresh signal you see there, on Dec 8th @ 16.50. VIX closed yesterday at $16.94 and is trading flat so far today in front of the Fed interest rate decision. It is not too late to get into the trade. With the Fed move later today and with Japan interest rates spiking higher, with the market overbought by a myriad of sentiment-based Sell Signals, it may be a bet worth taking. I'm in. VIX Calls Dec 17th - Betting on a rough market path in the immediate days ahead. Jan 21st - Aggressive, but with more time for a volatility spike to unfold. Suggestion: An evenly split bet between Dec 17th and Jan 21st. Trade Management (1) 50% hard stop from entry; (2) Once position is +100%: 50% trailing stop on half of position; (3) Exit remainder on first red Heikin-Ashi candle after trailing stop is hit. DISCLAIMER Past performance is not a guarantee of future results. Option trading can be dangerous and even with stops, risk is elevated.
