Over the years, we have discussed a lot of volatility-based trades. Since volatility is high now, a number of them are apropos, so for newer and older subscribers alike, this article is a condensed summary of what the primary implied volatility trading strategies are, and how and when to use them.
Volatility and the stock market normally move in opposite directions. But occasionally, the relationship between $VIX, $VIX futures, and the S&P 500 becomes distorted.
When that happens, a unique hedged options strategy can emerge.
The $VIX / $SPY strategy combines volatility options with SPY options to potentially benefit from both volatility mispricing and large market moves.
With volatility starting to stir again, this setup may be forming once more.
Both in May 2025 and October 2025, we published articles with the above title. I won’t include them here, because they were too long, but one can find them in the archives of The Option Strategist Newsletter on the website. I will, however, summarize them. It turns out that when realized volatility and implied volatility differ by a substantial amount, it can be a market-predicting event. Here’s the quick summary, using the 20-day historical volatility of $SPX (HV20) as realized volatility and $VIX as implied volatility:
Predicting stock prices consistently is difficult.
Predicting volatility behavior, however, is often easier.
That is why many professional option traders focus more on volatility than on price direction.
Every option price reflects a forecast about future volatility. Market makers and traders must estimate how much the underlying asset will move over time, and those estimates are reflected in the option’s implied volatility.
In The Option Strategist Newsletter, we recently had a very nice profit on a long run by the Silver ETF (SLV). We rolled that position seven times, each time taking a credit from selling a relatively deeply in-the-money call option and replacing it with an at-the-money call.
Volatility is one of the most misunderstood — and most powerful — forces in the options market. In this webinar, we go far beyond the basic definition of $VIX and examine how volatility derivatives actually behave in real market conditions. From understanding the mechanics of $VIX futures and term structure, to implementing “The Big (Volatility) Short,” to using $VIX/SPY hedged spreads during extreme discounts, this session focuses on practical strategy. If you trade options, manage portfolio risk, or use volatility products like VXX, SVXY, or $VIX options, understanding how these instruments are constructed — and when they diverge — is essential.
Most traders talk about delta, gamma, theta, and vega — but far fewer truly understand how they are derived, how they interact, and how they shape real portfolio risk. In this webinar, we go beyond definitions and dig into the models behind the “Greeks,” beginning with Black-Scholes and extending into practical neutrality, volatility trading, and portfolio projections. If you want to understand how professional traders measure and manage risk — not just direction — this presentation lays the groundwork.
How should you properly insure a stock portfolio?
Most investors default to buying puts — but the reality is that portfolio insurance is far more nuanced. The cost, structure, and implementation all matter. In many cases, the “standard” approach is not the most efficient one.
In this newly posted webinar, Insurance Using Derivatives, we walk through a complete framework for hedging equity exposure, including:
Volatility has increased with the failure once again of $SPX to clearly break out to new all-time highs. It last made a marginal new all-time intraday high on January 28th. SPX continued to probe those highs and then fell back. That established resistance near 7000. At that point, selling accelerated, taking $SPX down to 6780 at the close on Feb 5th, from where it has bounced strongly today.
We’ve begun publishing our full catalogue of recorded webinars on The Option Strategist Substack — and we’ll be adding more in the coming weeks.
These are complete, in-depth strategy sessions taught by me, Lawrence G. McMillan, covering everything from core option mechanics to advanced strategy construction and risk management.
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