Hi, I just finished modeling the SPY Volga surface into the close (see attached). Now imagine this: you sold the OTM strangles, you stress-tested a 5-point volatility move, looked at the potential drawdown, and you accepted it. Then the spike actually hit, and you lost double. Why? Because your platform lied to you! Most retail brokers show you a static snapshot of your exposure RIGHT NOW. They don't show you what happens to that exposure when IV moves from 15 to 25. The reality is Vega isn't a constant. When volatility rips, the entire surface reprices, your short Vega becomes significantly more negative exactly when you need it to shrink. That's Volga (also known as Vomma). Think about it: if Delta has Gamma, Vega has Volga. It's the second-order Greek that measures how your Vega changes as volatility moves. If you're short the wings, you are Short Volga. My rule: don't size off today's Vega. Ask: What is my Vega if IV jumps 20-30 points? If you haven't modeled that, you don't know your true position size!

Your Job: 1. Identify attempt (extension or reversion) 2. Watch for failure (can't sustain) 3. Confirm with Position/Structure/Response 4. Trade the failure 5. Stop at failure point 6. Target based on new direction Constants: As always the more strategically aligned the Price Position is, and the Price Structure going into the Extension or Reversion, and with the trigger like response to all of it the better. The VWAP is mainly a tool to know where to look for trades. The Further from VWAP the more risky it is to join an exisiting move. (Doesn't mean fight it either) The Closer to VWAP something could build and happen with Position, Structure, and Response. Will do more on this tomorrow

Been reviewing the VWAP and the Market some more this weekend, and what I'm seeing from the VWAP is that while it can be good to use it as a spot to trade from. I also think it probably more useful in a thought process. The way I been seeing it the VWAP is somewhere the Market is constantly trying to figure out it can extend from or revert to. Which mean Position, Structure, and Response are still important as always. Though thinking in 1. Successful Extension - Price breaks away from VWAP - Continues moving away 2. Failed Extension → Reversion - Price tries to extend from VWAP - Fails to continue - Trade: Fade the extension, target VWAP Example #1: Position: - Price above VWAP ✓ - Trying to extend higher ✓ Structure: - Weak on HTF (daily/weekly trending down) ✓ - Unable to make steady progress higher ✓ - Switching from "weak uptrend" to "beginning downtrend" ✓ What happened: - Extension attempt FAILED - Price couldn't sustain above VWAP - Market said: "No, we're not establishing new equilibrium higher" The Trade: - Short the failed extension - Price now reverts TO VWAP (and through it) - "Failure to extend + mean reversion = fast move" Why it worked: 1. HTF structure was bearish (daily weak) 2. Extension had no conviction (couldn't make higher highs) 3. VWAP provided the reference (failed to get away from it) 4. Downtrend + reversion = doubled force This is TEXTBOOK failed extension. Example 2: AMD LONG (Failed Reversion → Extension) The Setup: Position: - Price above VWAP ✓ - Trending down toward VWAP ✓ Structure: - Reversion attempt happening ✓ - Approaching VWAP ✓ What happened: - Reversion attempt FAILED - Price couldn't break below VWAP - Held and reversed higher - Market said: "No, we're staying above VWAP" The Trade: - Long the failed reversion - Price now extends AWAY from VWAP - "Failure to revert = trigger for uptrend" Why it worked: 1. Price defended VWAP (buyers stepped in) 2. Downtrend broke (couldn't make lower lows) 3. VWAP held as support 4. Failed breakdown = bullish reversal

Following up on today's very two-sided move, it is important to be aware of just how seriously two-sided the market is. This does unfortunately make it a little harder to plan the following day out, as there is a lot of noise; and it is very difficult to go through all of it and actually identify what is noise and what is signal. However, following up on my last point on how we can use the VIX to manage our ideas, I also think that the VIX can be a source of signal for planning. So with looking at the VIX, what can I see: 1. We are able to continue to put in new higher highs and higher lows on the HTF VIX = meaning we're likely to stay in a higher volatility environment for the time being. 2. We finished today with a HH on the VIX (see 10min chart), so early tomorrow I would be looking at how the VIX tries to form a bottom to then set up another shot higher (down for the market), or if it can hold a move lower (up for the market). a. A move down on the VIX I believe is totally possible, as the move higher today was very momentum-based on the VIX, and the more serious lows are near 20.5 on the VIX. So the market, from the 22.5 level, could recover as the VIX falls; and the VIX could still be in an uptrend. b. With the higher high, it could quickly make a HL and then go higher—totally. I would say that because of the two-sided nature of a VIX environment, truly both sides could be tested. However I would say that to start the day, because of the momentum push into the last hour of the day, that's began to fade. It will become incredibly important for trading to see the VIX make a solid higher low if it does take a serious shot higher. If the higher low does not show the strength it needs for another move higher on the VIX, then I would be cautious to continue shorting and actually be looking for a long. Really, anything could happen, and with the VIX so high, by the open things could look different. However, I stand by using the VIX as the foundation for my idea creation and will be watching it very closely whichever way it goes.

While all things like price position, structure, and response all matter, we are fundamentally heading for a different market environment. Again, we don't abandon everything we know because the price suddenly is swinging a lot, but what things we look for in terms of execution now shift. Here's how. When the VIX is this high, volatility is of course also higher. It can be more difficult to determine what is noise and what is signal, so what things can we look at for signal? The VIX Yes, literally, V-I-X. Watching the VIX intraday is likely to become a very useful tool for decision-making because after reviewing today's trading, there seems to be a common pattern. The best trades of the day have solid price structure, response, and location on the literal VIX chart. Meaning we should look at the VIX as confluence for decision-making. Bad price structure on the VIX and QQQ = well, probably not the best idea. Good price response, position, and structure on the VIX and the QQQ = could be a good spot. So instead of being too wrapped up about how HTF (still important), we need to recognize that in higher VIX environments, things can change very quickly—sometimes faster than a HTF chart can appreciate fully. Which means while it's still important to look at, it's unlikely that it has the best information outlet for trading in. So strategically speaking, moving forward, I will be using the VIX very closely in my decision-making process: cross-correlation, reading, and timing with the VIX for best possible execution.