Direxion Daily Financial Bull 3X Shares (FAS)

[Porgie Tirebiter]

I guess there are ways to play the VIX directly, but I don't.

I just use it as a gauge for implied volatility. For example, I would rather buy FAZ puts than FAS itself when I think RIFIN is going up. And I want to buy them with a Delta of just under .9. Right now to do that, you would have to pay about a $1.10 of extrinsic premium. As volatility drops, so will that premium, and that will reduce any profit you make if the price goes your way, or increase any loss you may have if the price goes against you. In fact, with dropping volatility, you can lose money even if the price goes your way. A real lousy situation.

But if volatility rises while you own the option, you get the opposite effect, extrinsic premium increases, and that can really add to your profit if the price runs with you, and reduce your losses if the price goes against you. If the rise in volatility is quick, like last week, you can make money even if the price of the underlying runs against you!! A fantastic situation!

Since right now the VIX is high, I can't buy options because the probability of volatility dropping is higher than the probability of it rising. With the VIX below 20, options will be safe again. Just have to be patient.

Did any of that make any sense?