Start Choppin'

Well we certainly got that VIX spike this morning.

So let us clarify.

I think it's OK to buy actual options into a move like that. Provided they are ATM or near money AND near month. I don't want to commit to paying up for volatility with too much time; the move is here and now.

I only bought gamma in 2 spots so far, one moved alot (AAPL), one not so much (AMZN). Both have earnings due, which is good in that you know volatility won't cave today in your face, but bad because there is some premium that could collapse if it's a non-event.

I flipped a little stock in spots where I could, but have traded pretty flat.

I don't play VIX products, but that wouldn't be my vehicle of choice here even if I did. My thought was/is that stocks were going to move, NOT that option volatility itself is going to reset higher after this plays out.

Here's an extreme example to illustrate this.

Let's say you buy XYZ Feb. 100 straddles at a 90 volatility. The stock is trading near 100 when you do it, so it's delta neutral.

Let's say the stock bounces all around, then goes up to like 120. And then volatility caves to a 60.

Was it a bad play?

Probably not. You likely paid for your options, and then some.

That's my point, buying actual options has two components that determine how well that purchase worked. What did the options volatility do, and what did the stock volatility do. If the latter exploded, it more than offset the former.