As premium sellers, a big part of our trading style is positioned for volatility contraction. Volatility and option prices have a positive relationship (they move in the same direction), so if volatility contracts, then option prices will fall. Volatility itself is normally in a state of contraction, as evidenced by the positive drift that we saw in the [Geometric Brownian Motion model](The market is usually in a state of volatility contraction, but it can expand, too. When it does, it usually happens very quickly) or the [contango](The market is usually in a state of volatility contraction, but it can expand, too. When it does, it usually happens very quickly) that usually exists in the /VX futures market. However, volatility doesn’t always contract; it can expand, too. And, when it does, it can happen quickly and explosively. We take a look at both daily and weekly movements in the VIX to support this idea.
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