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Here’s something I learned the hard way about trading Cboe Volatility Index (VIX) options — they don’t play by the same rules as everything else.
If you don’t understand that, you could be sitting on a winning trade one night and wake up to a total reversal the next morning. So today we’ll discuss why VIX settlement requires extra caution.
I had a VIX 16/17 spread that I entered recently. It was working great. If you received around 40 cents of credit, you could close it for about 16 cents. That’s solid — you’re walking away with most of your potential profit intact.
But some traders look at that and think, “Why not hold it overnight and collect the full credit?”
I get it. The market is behaving and the trade is working. Why not squeeze out every last cent?
Because VIX settlement is different — and that difference matters more than most traders realize.
Why VIX Expiration Trades Are Different
VIX options settle in the morning, not at the close like standard equity options. When you hold a VIX trade overnight into expiration, you’re exposed to whatever happens before the market opens.
The VIX could spike 15% overnight, and it wouldn’t be that much of a shock.
If a regular stock or ETF moves 15% overnight, that’s an extraordinary event. With the VIX, it can happen quickly. You can’t control that move or react to it until the damage may already be done.
You might collect the full credit if the market stays calm. But when you’ve already captured most of the available profit, the small amount left often isn’t worth the risk.
Adapt, Protect and Move On
Trading decisions should respond to the market in front of you. For example, when the iShares Silver Trust (SLV) makes a pop, that can create better value on a call spread. The job is to recognize that change and adjust rather than remain locked into the original plan.
The same mindset applies to VIX expiration. If conditions offer an attractive exit, take it. Don’t let the pursuit of the final few cents turn a successful trade into an unnecessary overnight gamble.
My rule is simple: I don’t like holding VIX trades overnight heading into expiration. If I’ve already captured a significant portion of the potential profit — 50% or more, for example — I’m usually out.
Trading isn’t just about making money. It’s about keeping it.
Locking in a gain is not a failure to maximize the trade. It’s disciplined risk management. When you understand how settlement works and stay prepared to adapt as prices move, you give yourself a better chance to protect profits and be ready for the next setup.
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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