INTRODUCING THE VIX HEDGE!

Finance / Markets Overview

The speaker describes an options-trading approach that combines:

• A “VIX hedge” using VIX call options
• Ongoing option-selling / Theta decay positions (a “Theta collector” mindset)

Market context (how the tape is expected to behave)

They characterize conditions as “overbought” and expect:

• The market may inch higher for the rest of the day
• Then revert down during the last ~30 minutes
• Followed by a weaker pattern over the next ~10 days

They also mention a “VIX monster” as the key driver behind account swings, without providing specific macroeconomic data.

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Tickers / Instruments Mentioned

• VIX — via VIX call options (the “VIX hedge”)
• VIXX — mentioned as “still 19” (likely an ETF/ETN related to VIX, though the exact instrument is unclear from the subtitles)
• No other equities, ETFs, bonds, or commodities are named.

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Trading Framework

1) “VIX Hedge” Rule Set (repeatable process)

Entry / initiation rules

• Buy VIX call(s):
  • Approximately ~10 Delta
  • About ~122 days to expiration (spoken as “122 days”)
• Allocate 0.25% of the total portfolio per hedge cycle
• Repeat every 30 days
• The speaker references a ladder/stacking framework with expirations approximately like: 120 / 90 / 16 / 30 (subtitles are messy, but the intent is a recurring roll/ladder)

Exit / expiration behavior

• “Let them expire under normal conditions” (i.e., not necessarily closing early)

Additional execution detail

Instead of buying too-close-to-the-money repeatedly, the speaker claims that buying extra contracts (rather than moving too near the money) provided more protection, based on their testing.

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2) General Options-Selling Discipline

The speaker frames the broader approach as:

• Probabilities in your favor
• Allow Theta to decay (collect Theta deliberately)
• Manage chaos, including:
  • Deltas
  • Buying power
• Rinse and repeat:
  • “probabilities → Theta collection → manage chaos → rinse and repeat”

Theta risk control (target)

They mention keeping Theta around a target level, with subtitles implying something like ~0.1% of account value in Theta, though the wording is not perfectly clear.

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Key Numbers / Quantitative Claims

Account / platform demo references

• “Tasty” account balance: $36,963 (slightly down vs prior day)
• Greeks shown as negative (as transcribed): -24 and 32 (exact meaning unclear)

• Buying power figures shown (at different times):

  • ~$11,907
  • later ~$10,462 (margin/cap-related)

• “Crimson” account balance: $34,303, later shown as ~$83,224 in another account view (subtitles mix accounts)

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VIX hedge allocation & example execution

Hedge sizing rule example

• 0.25% of portfolio = $208 (given their example portfolio amount)
• They compute roughly: $208 × 12 / 83.24 ≈ 3% of account (subtitles are noisy, but the core takeaway is that the hedge sizing auto-scales by % of portfolio/account)

Example hedge trade (as described)

• Instrument: VIX calls
• ~111 days to expiration (they mention choosing 111 vs 120/122)
• 10 Delta calls

• Strike: described as “60 strikes” (subtitles unclear, but it’s presented as 4 contracts at 52 cents)

• Contracts: 4 calls

• Entry premium: ~$0.52 per call
• Total cost discussion: mentions expense around $210 (exact total depends on premium and contract multiplier)

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Scenario: expected P/L impact (loss buffering claim)

They present a scenario:

• If VIX went to 40:
  • The account would be down ~ $22,000 (without the hedge)
• With the hedge(s) added:
  • Loss is claimed to be only ~ $21,000
• They emphasize this is partial downside buffering, and that it improves as more hedges are accumulated/stacked (“once you get a full bold… that’s when it really helps you”).

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When to Deploy the Hedge

• Explicit rule: the hedge is optimally used when VIX is under 20
• They state VIX is currently under 20 (mentioned down to ~19) and follow the rule because it’s in that range.

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Disclosures / Disclaimers

• No explicit legal-style “not financial advice” disclaimer appears in the provided subtitles.
• A disclaimer-like remark is included via humor/self-deprecation: “I’m just some fat guy sitting behind my little computer.”

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Presenters / Sources Mentioned

• Bobby — main speaker (referred to repeatedly as “sweet Bobby,” “hero,” etc.)
• Ed — mentioned (Discord/class context)
• Matt — referenced as having told them about hedge buffering losses
• Chris — community member with another trade/video idea
• Don Kaufman — referenced via “Dunn Kaufman world” (class association)