Why Did Selling SP500 Volatility Trades Blow Up?

Many have made their fortunes selling volatility premium and then losing it, that is because they are running down the lit fuse and not understanding that eventually, the strategy blows up.

In the chart below periods marked with A, B, C, D are periods of chasing yield which was so great the selling of option premium became vogue. Yes, this strategy worked for a while, and 'this time was different' worked until it didn't.

Selling volatility works great during period gray A until the cycle ended at red A.
Selling volatility works great during period gray B until the cycle ended at red B.
Selling volatility works great during period gray C until the cycle ended at blue C.
Selling volatility works great during period gray D until the cycle ended at blue D.

The point is if you play the selling volatility game, know thy cycle. Cycles matter!. The dominant cycles below gave you plenty of time to go to the sidelines when risk became apparent. 

NOW >>What is interesting is gray E, VIX is above 20, and the red cycle is rising with the blue cycle is pending a swing up which suggest we are in a pending crisis moment (deflation shock). 

IDEA: Have cycles studies in your investing plans, mix them with sentiment and market fundamentals.

(Click on image to enlarge)

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