Why I still pick VIX over SPX puts here

Someone asked me last week whether they should hedge a long-only book with SPX put flies or with VIX.

My answer is still VIX, and the reasoning is a path argument.

There's a decent chance we grind higher before we sell off. Say we see 8000 SPX first.

If you own SPX puts, you've then watched the market rally two hundred points away from your strikes. Those options are close to worthless and will struggle to recover much even on a move back down through them.

VIX doesn't have that problem in the same way.

Vol gets compressed on the way up, but it tends to struggle to go much lower from where it already is. So the position doesn't get punished the way an SPX put would as the index floats. A bit like a put that re-strikes itself as the market climbs.

The honest catch.

That whole argument only holds while vol refuses to keep falling. Right now it's still coming off on down days, which isn't the behaviour I want to see if I'm relying on the floor holding.

Which is the actual point I want to leave you with.

Two hedges can look equivalent on a spreadsheet and behave completely differently over the same trade. Same view. Same expected direction eventually. Very different P&L along the way.

How I actually make the call between two hedges that look the same on paper is because I respect a framework built over 20 years. The vol-surface check I run before I put either one on, and the path scenarios I stress each shape against.

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