Trading Epic Fury (Part 1)

Year-to-date, 2026 has been quite a surprise for me. While I won’t talk about performance just yet [first need to review the past few years to catch up from here], I can discuss my trading strategy especially with regard to the incident report I finally got around to posting.

With Operation Epic Fury beginning in the early hours of Feb 28 (all dates 2026 unless otherwise specified), the first real signs of backwardation occur on Mar 3. VIX is already somewhat elevated (20.10 compared to 14-17) the Friday before Epic Fury. Monday, Mar 2, sees spot VIX at 21.22 and moving into the term-structure range (higher than the front two months and lower than the rest). On Tuesday, spot VIX hits 22.80 and is higher than all but the last two months with the first three months in true backwardation. Relevant to assess at this time are these second and third bullet points.

I will take a closer look at daily SPX and VIX charts to illustrate further what kind of impact Epic Fury has had on the markets.

The incident report directs me to hedge the position when daily moves in the market become more frequent (first bullet point). I haven’t explicitly done this. While always aware of big moves on the current trading day, I have yet to start tracking daily SD moves longitudinally: something that will be getting onto my spreadsheet very soon.

Despite the shortcoming, I have done a few other things to indirectly accomplish the same thing. First, since VIX started to perk up I’ve been trading options closer to expiration. I don’t have the exact date at hand [perhaps a few months ago?], but at some point I noticed the ability to go the same distance OTM with shorter-dated options for comparable premium. The result has been significantly higher theta and a consistently high theta:delta ratio (TD). I suspect position gamma has also been higher but a largely rangebound market despite the war and soaring oil prices has kept this threat on the sidelines.

Selling more calls has helped to boost TD. In addition to DITM short calls managed on a campaign basis (rolling up and out), I now carry as many as five additional [very] short-dated calls. As mentioned above, this probably causes gamma to soar but with America at war, climbing the “wall of worry” is a minor concern while risk of a runaway market seems de minimis [quite to the contrary, on many days part of me has been expecting to see a market crash].

I will continue next time.