Why the VIX Above 30 Matters
When the VIX crosses 30, it means options traders are expecting big swings—roughly ±2% daily moves in the S&P 500. It’s a rare air environment, usually tied to stress events: a Fed shock, a credit freeze, or headlines nobody saw coming. I won’t say the “T” word – we’ve all heard it enough over the last few days.
The VIX crossed 35 a few times in 2022, but that 35-37 level has historically been a reversal point, meaning volatility settles down before setting up for a potential move lower. After Thursday’s market action, the VIX crossed above 30, which means we could see short-term volatility relief in the next few days.
That doesn’t mean I’m bullish, but that does mean there are a few different ways to play what the market is giving us.
Right now, markets are jumpy and cash is pouring into hedges. But that doesn’t mean it’s time to join the panic. It means opportunity—if you know where to look.
- Sell the Fear—Don’t Buy It
With premiums this bloated, buying protection after the VIX hits 30 is like shopping for flood insurance mid-storm. If you’re nimble, this is when selling volatility becomes attractive.
- Short strangles or iron condors on SPY or QQQ can pay well—just keep strikes wide and position size small.
If that’s too risky, consider put credit spreads below major support zones. You’re essentially getting paid to bet that the world doesn’t end this week.
- Don’t Fight the Tape, but Don’t Chase It Either
High VIX tends to create wild intraday moves and false breakdowns. This is where 0DTE strategies shine—especially fade setups.
- Watch for days when the market opens on a panic gap, only to grind higher as volatility sellers step in. That’s your window to fade the fear with bullish 0DTE call spreads.
- Use VWAP and gamma levels as your anchors. When price reclaims VWAP after a deep morning sell-off, that’s often your cue. Look at what happened on the SPY from 3/30 to 3/31 – there was a gap lower during the overnight session, a selloff at the open, and then prices reclaimed the VWAP and moved higher. When market prices re-tested the VWAP and held, it was a very short-term bullish buy, and sure enough, the market took off the rest of the day.
- Use VIX to Time the Turn
When the VIX spikes and starts curling lower—especially on a green S&P day—that’s often a reversal signal. Watch for:
- VIX divergence: If the index pushes new lows but the VIX doesn’t make new highs, fear might be topping.
- VIX crush days: If the VIX drops 3-5 points in a single day, that’s often a green light for short-term risk-on trades.
- Take Advantage of Skew
When fear is high, put options get way more expensive than calls. That opens the door for ratio spreads or broken wing butterflies—structures that give you room to be right and get paid even if you’re a little wrong.
Example: Sell two puts and buy one further out-of-the-money put. If the market stabilizes or drops only slightly, you walk away with the credit.
This broken-wing butterfly will give you $190 in credit for a risk of $3960. There’s no risk to the upside (a potential for a 4.7% gain in 14 days), and the breakeven level occurs if SPX drops as low as 5225 in the next 14 days. That means the breakeven level is 3.1% away from current market prices.
- Manage Risk Like a Pro
This isn’t the time to YOLO full-size trades. With the VIX above 30, one tweet or headline can nuke your setup. That’s why:
- Use defined-risk trades wherever possible.
- Scale into positions. Don’t go all-in at once.
Stay nimble—this is a scalper’s market, not a swing trader’s paradise (yet).
Bottom Line
A VIX above 30 means fear is high—but fear is a trader’s fuel. While the crowd scrambles for protection, volatility sellers quietly set the stage for a reversal. Stay cool, stay tactical, and don’t get sucked into the chaos.
