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The Four Pillars of Rational Trading: See the market exactly how I see it.
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Hey everyone — JD here with your Rational Trader Market Analysis Daily.
It’s been a wild week in the headlines. We’ve seen meme stock surges, tariff panic, a showdown between Jay Powell and the president, and of course, a mountain of earnings reports.
But in my view, the real story of the week — the one almost no one is talking about — is what’s been happening in volatility.
The VIX Just Touched 15
Don’t look now, but the VIX — Wall Street’s so-called “fear index” — is finally back near 15.
That might not sound like much, but it’s the lowest level we’ve seen in quite a while. And it’s validating one of my favorite trade setups of 2025: fading volatility using the SVXY, the inverse VIX ETF.
Why This Trade Has Worked So Well
For more than a month now, I’ve been long SVXY — based on the view that volatility would drift lower as the market absorbed all the noise and returned to statistical normalcy.
But most traders have been too gun-shy to follow. And who can blame them?
The first half of 2025 was dominated by volatility spikes. It’s not easy to short volatility when it feels like the next landmine is always a headline away.
That hesitation created an arbitrage — a pricing gap between where VIX was and where SVXY should’ve been if traders were behaving rationally.
That’s what I’ve been exploiting. And it’s worked.
The Results So Far
Since I first flagged this trade, SVXY has moved from around $42 to above $45 — and I still have a target of $50.
But if we hit $48, I might start locking in profits. That would represent a move of about 15%, which is plenty for a trade that didn’t require catching a breakout, chasing earnings, or guessing macro policy.
It was just a bet that fear would settle — and it has.
Why August Has Me a Little Nervous
That said… I’m keeping an eye on August.
August is notorious for low-volume market manipulation, especially from hedge funds who like to use the quiet weeks to push prices around. That makes it a dangerous month to be short volatility.
So while I’m still holding the SVXY trade, I’m also staying cautious.
If we get 2 to 4 more weeks of daily closes with VIX below 15, I think the last of this arbitrage will bleed out — and we’ll be close to done.
What I’m Watching Now
- VIX below 15 on a sustained basis
- SVXY approaching $48–$50
- Any signs of headline-driven spikes that could disrupt the trade
I’ll continue to keep you updated, but for now, fading fear is still working — even if August makes me a little uneasy.
Talk soon,
JD
The Rational Trader
