VIX Futures Spike Fade

Entry Logic

• Exact Entry Trigger: Enter short VIX futures after a sharp spike in the VIX.
• Confirmation: The spike should be on high volume and should be accompanied by a sharp sell-off in the stock market.
• Timeframe: 1-hour chart.
• Location Context: Not applicable.
• Market Condition: A market that has just experienced a major fear event.

Exit Logic

• Profit Targets: A fixed target based on the expected mean reversion of the VIX.
• Scaling Out: Not recommended.
• Trailing Stop: Trail the stop loss above the high of the VIX spike.
• Signal Failure Exit: Exit if the VIX continues to make new highs.
• Opposite Signal Exit: Not applicable.
• Time Expiration: Exit the trade within a few days.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A fixed stop above the high of the VIX spike.
• Soft Stop: Not used.
• Max Dollar Loss: Varies by contract.
• Max Percent Loss: 2% of account capital.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 1% of account capital.
• Maximum Daily Loss Limit: Not applicable.
• Maximum Weekly Loss Limit: Not applicable.
• Maximum Drawdown: 15% from peak equity.
• R:R Requirement: Varies.

Position Sizing Model

• Sizing Approach: Fixed contract size.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: A market that is in a prolonged period of high volatility.
• Specific Setups Required: A sharp and unsustainable spike in the VIX.
• Instruments: VX (VIX futures).
• Time Restrictions: Can be traded at any time.
• Chop/News Avoidance: This is a news-driven trade.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale Out: Not applicable.
• Add Size: Not recommended.
• Fast vs Slow Moves: This can be a fast-moving strategy. Be prepared for quick price changes.

Time Rules

• Optimal Trading Window: Following a major spike in the VIX.
• Times to Avoid: When the VIX is in a downtrend.
• Session Notes: This strategy can be traded in any session.

Setup Classification

• A+ Setup: A massive and unsustainable spike in the VIX.
• A Setup: A significant spike in the VIX.
• B Setup: A minor spike in the VIX.
• C Setup: Avoid. The VIX is not spiking.

Market Selection Criteria

• Instruments: VX (VIX futures).
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: Not applicable.

Statistical Edge Metrics

• Win Rate: 70-80%.
• Avg Win: Varies.
• Avg Loss: Varies.
• Profit Factor: Varies.
• Expectancy: Varies.

Failure Conditions

• When Strategy Fails: When the VIX continues to trend higher after the initial spike.
• Specific Scenarios to Avoid: Shorting the VIX in a bear market.

Psychological Rules

• Mental Discipline: This is a contrarian strategy that requires a strong stomach. You are buying when everyone else is selling.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Monitor the VIX for extreme readings.
• Correlation: This strategy is based on the mean-reverting nature of the VIX.
• MTF Alignment: Not applicable.

Location

• Where Strongest: After a sharp and emotional spike in the VIX.
• Where Weakest: In a market that is in a sustained period of high volatility.