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Interesting way to hedge using VIX options. Thanks for the article.

I'm familiar with a similar approach, but using SPX options. The system is explained here:
https://thefelderreport.com/2016/08/15/worried-about-a-stock...

It works very well, and one can budget for ~1% of the portfolio as the annual cost of the insurance. It does not work well for smaller than 20% drops, but that's not its purpose. An example:

I purchased a few Puts on 20200121 on SPX expiring 20200320, strike 2600 (Delta 1) for 170$. At that time SPX:3320 and Vix:12. They were sold on 20200319 for 22,500$ with VIX:82 and SPX:2380. That's a gain of 130x. The system works as designed as long as: a) The puts are purchased diligently, no when you "feel like it", b) you are ok with those puts expiring worthless 99% of the time, which is another meaning of delta 1.


By the way the cost of insurance has gone up now that the Vix is above 25. Also, the selection of the strike price also changes. Delta 1 is way too low as the chains expand with iVol.

The only advantage that I can see, without the benefit of fully knowing the VIX option approach, is that SPX works like any other options. Puts go up with Volatility. With VIX one has to play the calls and that adds a potential confusion if many options plays are on the cards.
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