Namaste and mechanics thoughts

I was waiting for the full recoup on SVXY to all time highs but with S&Ps knocking on the 2500 door I might as well check back in and recap the whole last month August action.

I think it was a great proof on concept for the short VIX strategy of keeping a large cash position to buy these dips while having static short VIX positions that gave some leeway (I had 10% OTM SVXY credit spreads that I did a lot of rolls and selling calls against to hedge).  I'm still a bit torn on the SVXY put spread and rolling versus more aggressive UVXY put debit spreads and actually taking a loss (even though rolling is kind of realizing a loss).  I think my main regret here is that my buying power usage kind of expanded just to roll existing positions so I didn't load up on the dip as much as I wanted, although I'd rather it go like this than go in too heavy at ~16 VIX and then not be able to load up at ~25 VIX.  I am kind of predisposed to the psychology of 'tuck and roll' where we know short VIX will come back, its just really a trade off of how much buying power you want to commit to that. 

Here's where we get into the real Namaste meditation of it though, those days were stressful, but that is kind of the point, that is why we have risk premium, so just breathe.  I had some pretty ugly red numbers and over the few weeks I have been thinking on ways to optimize (not shy away).  This may including a slightly bigger uncorrelated position of TLT/GDXJ/SLV etc while having a lower max risk allocation in short VIX, like ~20-25% down from 40%, while having higher %ROI trades to offset.  That is basically a continuation of the journey from Boglehead to short VIX where you are going from low yield with the whole portfolio to higher yield with a small % of the portfolio so you can buy dips.

I had a core strategy at the beginning of the year to use a % of the portfolio to short VIX, and we either print money (like the 1st 8  months) or get tested and make bigger bets.  I think the core strategy is sound, and the infinite variation in it is the % risk allocated at different spot VIX levels, and the %ROI strategies and products to use.  You might be making the most money on the static positions for the general grind and then be really defensive on the VIX spikes and just try to hold your profit trajectory, or you could be really light most of the year and try to make the most during the VIX spikes.  Psychologically I lean toward the former because its easier to project annual ROI and I would be stir crazy in years like this. 

The one thing I always come back to is the short VIX core position vs the more conservative cash only, and buy in on short VIX on spikes.  If we followed that we wouldn't have made a trade in 8 months! I just don't think I could have handled that.

So back to the meditation, once you have your max risk setups and system laid out, then it is just about breathing.  Let Kim's missiles whiz right by you, move to one side so the hurricane floodwaters flow past, and inhale deeply.. expanding the rib cage and sit up straight as the debt ceiling raises and makes room for your heightened posture.
And just like stretching and making it hurt will let you stretch a little further the next time, these big August hits are like the stretching for your mind that makes the next set of hits an even smaller nothingburger.  I'm the first to admit I'm not a full buddha grandmaster yet, I had a moment of weakness and took off some risk before the big 9/11 Irma/Kim weekend, but that is just part of the journey.
At the macro level, the more big risks that come and go, the more the conceptual human volatility contracts, and I have to believe some tiny % of that translates to markets, thus keep breathing and keep shorting VIX.