BY MARK SEBASTIAN
August 20th, 2025
Dear Money-Maker, Mark here.
Everyone thinks a VIX spike equals easy money on vol trades. They’re dead wrong, and I’ve got the numbers to prove it.
Today the VIX spiked to 17.19 while tech got absolutely hammered. Nvidia down $3, Palantir down 4%, Reddit down another 4%. Classic volatility setup, right?
So here’s what happened to the “obvious” vol play.
The 19 VIX calls were trading at $1.67 going into today. During the spike to 17.19, those same calls hit $1.83. You made 16 cents on a full point VIX move.
Sixteen cents.
When the VIX moves up a point, September futures should typically move about 50 to 55 cents.
That’s how the math usually works.
Today? They moved 28 cents.
Here’s why: the curve already priced this in.
VIX closed at 15.50 yesterday, but September futures were already priced at 18.35.
That’s almost $3 of premium built into the curve before anything even happened. So when the “volatility event” actually occurs, there’s no juice left.
The spread was massive going in, which is exactly why VIX calls haven’t worked.
Everyone sees the setup, everyone piles in, and the market makers price in the move before it happens.
This is what I mean when I say premiums tell you everything. The crowd was already positioned for this exact scenario.
The thing about these late August moves is volume is typically sparse, which leads to wider swings than fundamentals would warrant.
But obvious trades are usually the ones where all the edge has been arbitraged away.
When everyone’s running the same play, you need to find what actually has edge.
Look at what happened with that Walmart strangle I talked about. The 6410 straddle was going for 65 bucks, which I said was inexpensive. Well, just the put side hit $48 at the peak today. You could have sold at 71.
That’s the difference between buying vol the right way versus chasing VIX calls into an overpriced curve.
So what actually works when everyone’s getting chopped up on vol trades?
I’m buying premium in SPX and buying puts.
I’m looking at strangles for next week because they’re all too cheap relative to what’s coming. Powell speaks Friday, and we’ve already gotten a mini preview of his message today with the Fed minutes.
The market’s pricing in an 83% chance of a September rate cut, but nobody knows what Powell’s actually going to say Friday.
If his language is more hawkish than expected, tech gets hit even harder. If he’s dovish, we bounce hard off these levels.
Either way, we’re getting movement. And movement is exactly what strangles are designed to capture.
I’m also watching Reddit down 4% as a huge opportunity.
This is very much a “top of market” sell-off hitting the momentum names while consumer staples are actually up.
When you get that kind of rotation, you know it’s not systemic fear – it’s profit-taking.
The key is understanding what the market’s actually pricing versus what everyone thinks it’s pricing.
VIX calls look obvious, but the real money is being made by traders who understand why that spike didn’t translate into vol profits – and what to do instead.
With VIX now back down to 15.64 as I’m writing this, the lesson is crystal clear: the obvious play already had all the juice squeezed out before the move even happened.
Your Only Option,
Mark Sebastian
P.S. Make sure to join us live tomorrow for Option Pit Advance Notice. It’s 100% free to attend.