The Rational Trader: How I Faded a Volatility Spike for a Fast Win

Good afternoon everybody. JD here with your Rational Trader market analysis daily.

Today started like any other — clean slate, fresh perspective. That’s how I treat every trading day, like a golfer stepping onto a new tee box. The past is in the past. What matters is this setup.

And I like to come prepared. I’ve got my own little black book of market patterns, idioms, and observations I’ve gathered over the years. That mental notebook helps me find edges — especially during pre-market prep.

A Spike in Volatility — But Why?

Around 8 a.m., things went sideways. A sudden jump in the VIX caught my eye. Turns out, there were a couple of geopolitical headlines hitting all at once — news of a potential Israeli strike on Iran, and even reports of an embassy evacuation. That’s the kind of stuff that throws volatility traders into a frenzy.

Next thing I know, the VIX is pushing 18.5 — a huge move overnight.

Now look, I’ve been fading falling volatility since mid-May using SVXY. Out of 9 trades, 6 have worked, and I’ve pulled in about 200 basis points doing it. But this morning, I knew I had to call an audible.

Inflation Eases — and Opportunity Knocks

At the same time, the Producer Price Index (PPI) came in cooler than expected — signaling that maybe inflation really is calming down. Rate cut odds went up. And that’s exactly the kind of environment that small-cap stocks tend to love.

So when IWM — the small-cap ETF — was down about 80 basis points in pre-market, I saw a mispricing. Volatility was spiking due to headlines, but the inflation data told a different story.

I bought IWM just under $212.

The Trade That Got Away (Sort Of)

Now, full transparency: I missed the initial pop because I was on my morning walk. Happens sometimes. But by midday, IWM had bounced enough to give me a clean 40bps profit.

And in this game, stacking small wins is how you build long-term performance.

That one trade nudged my Money Fortress YTD performance up to 14.5%. I’m staying nimble — preserving capital while outperforming the market. That’s the mission.

Final Thoughts

Yes, the volatility story might be changing. But that doesn’t mean the trades are gone. It just means you need to stay sharp — and recognize when panic presents a gift.