The Rational Trader: This Volatility Trade Could Be a 50% Gainer

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

Today’s video is about something I don’t say lightly: a potential slam-dunk trade.

It’s an arbitrage setup — between the VIX (the so-called “fear gauge” of the market) and the SVXY, which moves inversely to volatility.

Let me explain.

Volatility Is Fading — But SVXY Hasn’t Caught Up

I believe we’re headed for lower volatility over the next few weeks — maybe down to the 13–14 range on the VIX by late July.

Historically, that would mean SVXY — the ETF that profits from fading volatility — should be trading much higher than it is now.

But it’s not. And that’s the opportunity.

Why the Mispricing Exists

Institutional investors, the big macro funds, still have PTSD from 2022. Even though all the signs point to falling volatility, they’re not stepping in.

They’re spooked.

And that fear is creating a pricing mismatch. Based on past relationships, SVXY should be trading 10–15% higher right now. If the VIX keeps dropping — and I think it will — SVXY could climb to $50, $55… maybe even $60.

From today’s level around $42? That’s close to a 50% move.

How I’m Approaching It

This is one of those setups I love: when the data says one thing and the market hasn’t caught on yet.

It’s not guaranteed. Nothing ever is. But when you’ve got:

• A VIX heading toward summer lows

• Historical patterns pointing to higher SVXY

• And a market full of scared money on the sidelines…

That’s where opportunity lives.

I’m not saying back up the truck. But this is one to watch — or act on — if you know what you’re doing.

And here’s the kicker: if SVXY does hit $55–60? That’s probably your cue to flip the script and go long volatility. Complacency always invites a spike.