On March 16 at about 2:30 we noticed a spike up in the VIX above 30.  The broad market was selling off quickly, and VIX was one of the few green islands in a sea of red.  The last time the VIX traded above 30 was back in July, and levels have been as low as 15 earlier this year, so a spike above 30 presented a good opportunity.  Given that the market tends to over-react, we knew we needed to get short the VIX, and selling front-month calls allowed us to capitalize on an increase in the VIX (delta) and an increase in volatility of the VIX (vega).

We looked at the April 30 calls which offered good exposure to both delta and vega.  We sold some at $2.10, then more at $2.30.  When the VIX came off the next day (March 17), we were able to close half the position at $1.50.  The following Monday (March 21), we closed the balance at $0.75.

Written by Jennifer Galperin. Follow me on Twitter and StockTwits.