Investment Strategy Overview

At Vich Capital, we view volatility as a distinct and tradable asset class. Our approach is not based on simply being long or short volatility. Instead, we combine a proprietary timing model, rules-based execution, premium-selling strategies and defined-risk structures to determine when and how we take volatility exposure.

The objective is straightforward: identify attractive opportunities in volatility while maintaining a disciplined approach to timing, position sizing and risk.

The Challenge of Timing Volatility

One of the fundamental challenges of volatility investing is timing.

Market shocks and volatility spikes can happen quickly, but no one knows precisely when the next event will occur. Maintaining long-volatility exposure while waiting can therefore be expensive.

Buying options requires paying premium, which can decay over time. Long positions in volatility-related ETFs can also be costly to maintain for extended periods. If volatility remains subdued longer than expected, repeatedly paying for protection can negatively impact returns—even if a volatility event eventually occurs.

And volatility can remain low for a surprisingly long time.

This is an important part of the reasoning behind our approach.

Rather than continuously paying premium while waiting for an uncertain event, our strategy generally favors selling volatility premium when conditions are favorable, while maintaining defined protection against significant upside moves in volatility.

Why Mean Reversion Matters

One of the most important characteristics of volatility is its tendency toward mean reversion.

Unlike an equity index, which can establish a long-term directional trend, volatility has historically tended to oscillate between periods of relative calm and periods of elevated market stress. Following significant volatility spikes, volatility has generally tended to normalize as market conditions stabilize.

This characteristic is an important component of our strategy.

Periods of elevated volatility can result in richer option premiums, potentially creating attractive opportunities for premium-selling strategies as volatility normalizes.

However, simply selling volatility because it is elevated is not a strategy.

Volatility can always move higher.

Timing, position sizing and protection therefore remain critical.

VIX vs. S&P 500 — Historical Relationship (1990–2025)

The historical relationship illustrates the distinct behavior of volatility across different equity-market environments. Periods of market stress have generally coincided with elevated volatility, followed by periods in which volatility normalized as market conditions stabilized.

Selling Premium — With Defined Protection

Our primary approach utilizes out-of-the-money net-short call spreads.

Rather than maintaining unlimited short-volatility exposure, the structure combines selling option premium with purchasing protection further out.

This allows us to seek to benefit from premium collection and time decay while defining the upside risk of the position if volatility moves sharply higher.

Exposure is not static.

Positions are scaled up or down based on our proprietary model, market conditions and predefined risk parameters.

This distinction is important. We are not simply short volatility. The strategy is designed to determine when conditions justify taking exposure, how that exposure should be structured and how much risk should be allocated.

What Happens When Volatility Stays Low?

A volatility strategy should also address extended periods of calm.

Volatility can remain low for months, making continuously purchasing volatility protection expensive. Our strategy does not require an immediate volatility spike to create an opportunity.

When conditions are appropriate, premium-selling structures can potentially benefit from time decay and volatility remaining contained, rather than continually paying premium while waiting for the next market disruption.

As conditions change, exposure can be reduced, increased, hedged or repositioned.

Our Timing Model

At the core of Vich Capital’s strategy is a proprietary model in which capital flows into the S&P 500 serve as the primary input.

The model is primarily designed for timing.

It does not operate in isolation. Execution follows a strict methodology—a defined set of rules governing:

• Strategy and instrument selection

• Entry and exit timing

• Position sizing

• Hedging

• Increasing or decreasing exposure

• Long versus short positioning

We also closely monitor market breadth, momentum, sentiment and liquidity indicators. These provide additional market context and help refine execution, timing and positioning.

The strategy primarily uses listed options to express volatility positions and manage portfolio risk. Instruments and positioning are selected based on our proprietary model, market conditions, and predefined execution and risk-management rules.

Risk Management Is Part of the Strategy

Volatility can change rapidly. A short-volatility position without appropriate risk controls can experience significant losses during sudden market dislocations.

For that reason, risk management is not an afterthought—it is embedded directly into our methodology.

Hedging is systematic rather than discretionary, and position size and overall exposure are adjusted according to predefined rules and changing market conditions.

Our objective is not to predict every market move or identify the precise top or bottom in volatility.

Instead, we seek to combine the mean-reverting characteristics of volatility, disciplined timing, premium collection, defined-risk structures and dynamic exposure management into a repeatable investment process.

Ultimately, the question we seek to answer is not simply whether volatility will rise or fall.

It is:

When should we take risk, how much risk should we take, and how should that risk be structured?

Disclaimer:

This article is provided solely for educational and informational purposes and does not constitute investment advice, an offer to sell, or a solicitation of an offer to buy any security or investment product. Options involve risk and are not suitable for all investors. Certain options strategies may result in substantial losses, and some uncovered options strategies may involve theoretically unlimited loss potential. All examples are hypothetical and simplified for educational purposes and do not reflect actual trading results. Past performance is not indicative of future results.