VIX – the “Fear index” – tends to revert to the mean. That’s the basis of Kevin Kwan’s options trading strategy of shorting VIX after spikes. He sat down with me to explain his strategy more in detail.
Learn how Kevin shorts VIX in this video
The video was produced with Streamyard – an easy-to-use and amazing tool for live streaming and recording.
Kevin Kwan
Kevin Kwan, a San Francisco Bay Area-based options trader since 2017, also works in commercial real estate finance. His trading journey began with stocks in 2016, evolving into options through platforms like Robinhood and Tastytrade. He explains that shorting VIX for him is a supplemental strategy. His core options trading strategies are centered around being long the indexes.
Why short the VIX?
The VIX (CBOE Volatility Index) measures expected market volatility over the next 30 days. Known as the “fear gauge,” it spikes during crises but has, according to Kevin, a proven tendency to drop back down—a phenomenon called mean reversion.
Kevin’s strategy capitalizes on this pattern:
- Short the VIX when it is high (typically above 30-40).
- Profit as it inevitably falls back to its average range (12-20).
Kevin underlines that shorting VIX cannot be a regular strategy. Rather, it is based on seeing and acting on the opportunities when they arise.
Key takeaways from the interview
1. The VIX always reverts to the mean
Historical examples (like the 2008 crash and COVID panic) show the VIX spiking above 80—only to collapse within weeks.
Kevin explains:
“If you see VIX at 40 or 50, it’s going to fall back below 20. It’s just how VIX works.”
2. How to spot shorting opportunities
Kevin waits for specific VIX levels to trigger his trades:
- 20-30: Start small (5% of capital).
- 40-50: Ramp up positions (short strikes at 70-90).
- 60+: “Go all in” with defined-risk spreads.
3. Low-stress trade management
Unlike day trading, this strategy requires patience:
- Use monthly expirations (30-70 days out) for slower decay.
- No stop losses—VIX notional risk is small.
- *”I can sleep well at night shorting VIX at 80-90.”*
Common mistakes to avoid
Kevin shares his hard-earned lessons:
- Don’t overcommit capital early (e.g., at VIX 20-30).
- Avoid weeklies—low liquidity and erratic moves.
- Stick to the plan (he lost $7K breaking his own rules).
He explains his trading style in much more detail in the video interview.
