Trade Idea – Bear Put Spread on VXX (Part 2)

Disclaimer: The trades discussed in this blog reflect the author's personal strategies and decisions. These are not financial advice and should not be considered recommendations to buy, sell, or hold any financial instruments. The author is not a licensed financial advisor. Options trading carries significant risk, and readers should perform their own research or consult a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results.

After exiting my previous VXX trade with a quick gain, I didn’t expect to be back in quite so soon—but here we are. Following Trump’s abrupt U-turn on tariffs, Wall Street staged one of the largest daily bull spikes in recent memory. But just as fast as euphoria spread, uncertainty returned. Markets reversed sharply, volatility spiked, and the VIX shot up, dragging VXX along with it.

With the market now back in “risk-off” mode, I used our screener to identify a new bear put spread opportunity on VXX. Here's the setup:

VXX Bear Put Spread (Re-entry)

• Buy 1 Put Contract: Strike Price $73, Expiration September
• Sell 1 Put Contract: Strike Price $72, Expiration September

Here is the P&L of this strategy:

At the time of the trade, VXX was trading above $85, as you can see:

I’m targeting a pullback below $72.78. This setup gives me a clear edge: a maximum potential gain of $77.50 per contract, while limiting my downside to just $22.50. The risk/reward profile is again favorable, and with a long-dated expiration, I have time on my side—though I’ll be looking for a quicker exit if we see another volatility crush.

Why This Trade Still Makes Sense

The current market mood is jittery, but I remain anchored to the core thesis: while short-term spikes in volatility are to be expected, especially in a politically reactive environment, they rarely sustain for long. VXX, by nature, decays over time due to futures roll mechanics, particularly when contango reasserts itself.

Even though geopolitical and economic headlines are driving sharp moves, I expect cooler heads to prevail again. The 90-day pause on tariffs may lead to temporary deals or negotiations that reduce perceived market risk. If that happens, volatility should retreat just as quickly as it spiked, setting up a profitable exit for this new bear put spread.

With defined risk, asymmetric reward, and a structure that benefits from mean-reversion, I’m comfortable re-engaging this trade idea. Now, it's just about staying patient and nimble.

For transparency, you can find all my trades in the public trade log.