Welcome to my review of a presentation that Don Kaufman has been promoting called Vomma Zone.
When I received an email invitation from his firm, TheoTrade, to check it out, I wanted to find out what investment opportunity he was teasing that would bring “quick and lasting stock market success.”
Therefore, I went through it and did a bit of research before putting together this review where I share details of how it works and its advantages and drawbacks. I also give my opinion on whether I think it is legit.
Keep reading to learn more about Vomma Zone.
Before I start…
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Vomma Zone Review
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Introduction to the Vomma Zone pitch
Vomma Zone is a presentation that centers on an investment strategy championed by Don Kaufman that takes advantage of market volatility to generate returns.
It reminds me of The Portfolio X Ray by Keith Kaplan, which also focused on the effect of volatility on trading.
Don acknowledges that in 2020, market volatility was through the roof due to the impact of the coronavirus pandemic on the economy. The most telling indicator for him has been the movements we saw in ETFs. He mentions that ETFs, which are usually known for their stability, had been volatile and that means that the economy was going through a period of unprecedented volatility.
Amid this volatility, he has identified an opportunity to make money. He even marks February 24th as the day when 18 months of opportunity kicked off; a day when the “red line” was crossed.
To better understand what Don Kaufman is talking about, you should understand what he is referring to as “the vomma zone” and “the red line.” We will get to them in a bit, first, let’s examine how he uses volatility to trade.
What is Vomma?
Vomma is the rate at which the vega of an option reacts to volatility. It is a term used commonly in options pricing.
Vega enables an investor to internalize the sensitivity of an option’s price to volatility in the underlying instrument. Put plainly, it is defined as the expected change in the option’s price caused by a 1% change in the volatility of the underlying asset. When vega is positive, it indicates an increase in option price and when negative, it shows a decrease.
For instance, when an option has a vega of 5 on its underlying stock at $100, it indicates that the price will go down by $5 for every percentage decrease in implied volatility and go up by $5 for every point increase.
Vomma is the rate at which the vega of the option will react to volatility. It is a second-order derivative of an option’s value and it shows the convexity (a measure of the curvature in the relationship between bond prices and bond yields) of vega.
For example, when vomma has a positive value, it shows that a percentage increase in volatility will cause an increase in option value.
The VIX and the VVIX
In the presentation, Don says that he tracks the volatility of the volatility index (VIX). This is what he calls deep volatility or the VVIX.
The VIX is a ticker symbol for the Volatility Index used by the Chicago Boards Options Exchange (CBOE). The Volatility Index is used to gauge the stock market’s expectation of volatility based on the prices of S&P 500 index options. Since it focuses on options with short expiration periods, it gives traders a forward projection of the volatility in the short term.
It is used to gauge market sentiment and in essence, the degree of fear among market participants.
The VVIX was introduced in 2012 by the CBOE. It means “the VIX of the VIX” because it tracks the volatility of the VIX.
Just as the VIX is calculated from the price of index options, the VVIX is calculated from the VIX options. It has the same formula.
Therefore, basically vomma measures the rate of change relative to change in vega (implied volatility). As VIX measures expected movement in the S&P 500 options index, vomma measures expected movement in VIX. That is the key difference between the two.
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Kaufman’s Investment Strategy
Kaufman uses the deep volatility indicator (VVIX) and as he creates a mathematical model for the financial markets, he uses the following formula:
Once has the VVIX number, he checks whether it has passed the red line.
The red line, according to him, is when the VVIX is at the “110 level.”
Don has a tool he calls the Auto Expected Move that helps him track the volatility. There are levels that the volatility has to pass to indicate that there is an opportunity to make money. In the presentation, he says that “level 110” is the definitive one and he calls it the “Red Line.”
He then says that when the volatility indicator surpasses “The Red Line” it enters the “Vomma Zone.”
An article posted on TheoTrade.com describes the Vomma Zone succintly:
What we term the Vomma Zone, is a critical area for the VVIX that signals potential for major movement in the VIX and the SPX.
Where is this threshold you ask?
When the VVIX crosses above 110, this is major signal that institutions are using VIX options to hedge the potential downside risk in the market. When there is a surge in call buying, this causes the VIX options to become more expensive and, as a result, causes the VVIX to rise.
This is what happened on February 24th.
He says that when the volatility enters the Vomma Zone, the opportunity to make money can last anywhere between a few hours, days, weeks, and months.
He says,
“It is an alternate reality that cracks open when that red line is breached. Sometimes a Vomma Zone opens for hours, other times, it is days or weeks… occasionally it is months.”
In this case, he says that it will last 18 months.
What happens if the volatility falls below the red line?
Don assures us that this will not affect the money-making opportunity; although he doesn’t really explain how this works.
Even with the stock market on the upward trajectory in the past year or so, Don Kaufman believes that there is a section of the stock market that has done even better and it also happens to be in the Vomma Zone.
He says that he expects market volatility to remain high and to take advantage of that, he has identified stocks that he wants to start trading options on. He prefers investing in options to trading stocks directly because that way, the initial investment is lower thus he doesn’t expose himself to substantial risk.
Through the power of leverage, he says that options earn him bigger returns than stocks comparatively.
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Who Is Don Kaufman?
Don Kaufman is the man behind the presentation.
He is one of the leading financial analysts in the finance sector with more than nineteen years of experience. He has had a lot of stock market success during his career.
Don Kaufman is a co-founder of Theotrade, a firm that educates traders about different aspects of the market to make them more rounded and successful traders. He oversees TheoTrade’s firm-wide strategy and deployment initiatives by applying his knowledge and experience in the financial education space with his investment recommendations.
Prior to starting Theotrade, he was educating traders about the different ways of making money in the stock market at TD Ameritrade. TD Ameritrade had earlier acquired the firm that initially introduced him to the finance industry. It was called ThinkorSwim and he was in charge of the education division before the acquisition.
He graduated from Northern Arizona University with a Bachelor’s degree in Molecular Genetics.
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How to access Don Kaufman’s insights
To benefit from Don’s insights courtesy of the Vomma Zone, you have to purchase the Retirement Protection Kit.
When you purchase it, you will be entitled to the following:
- Guide To Surviving & Thriving In Extreme Volatility. It is a private internal video briefing that shows you how to navigate volatile markets.
- At least thirty-six trade recommendations that will be delivered to you via email and text within the next three months.
- Access to Don Kaufman’s Auto Expected Move indicator.
- Three months of 24/7 access to the “Netflix For Traders.” These are video tutorials that introduce you to trading if you are a newbie.
- A 3-month VIP membership pass to Theotrade. With this membership, you will gain access to 6 hours a day, 5 days a week of trading advice & community interaction sessions.
- Quick and personal response to any trade-related question or query within 24 hours or less.
- Access to five done-for-you trading portfolios.
- Access to a total of 59 privately-developed trading tools that the team at TheoTrade uses daily.
Other benefits include access to overlooked stocks set to rise during the pandemic and 24/7 access to The Official TheoTrade App, which is the one-stop shop for educational content and trading alerts.
Subscription Fee
You can purchase the Retirement Protection Kit through a one-time payment of $297 or two separate payments of $149.
Refund Policy
The fee is non-refundable.
Disclaimer
TheoTrade has a disclaimer that states:
“Neither TheoTrade nor any of its officers, directors, employees, other personnel, representatives, agents or independent contractors is, in such capacities, a licensed financial adviser, registered investment adviser, registered broker-dealer or FINRA|SIPC|NFA-member firm. TheoTrade does not provide investment or financial advice or make investment recommendations. TheoTrade is not in the business of transacting trades, nor does TheoTrade agree to direct your brokerage accounts or give trading advice tailored to your particular situation. Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction or investment.”
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Pros of Vomma Zone
- It has a one-time subscription that gives you access to the complete retirement kit.
- You learn about how volatility can be used to better navigate stock market price movements and volatility changes.
Cons of Vomma Zone
- There are volatile changes in options prices and trading can be inherently risky
Is Vomma Zone Legit?
Vomma Zone is legit.
The investment strategy employed by Don involves trading options, which he arrives at by studying the market using the VVIX volatility indicator. It provides an even deeper analysis of the market than what he gets by using the VIX. With it, he analyzes the market in search of investment opportunities that can earn returns in a short period.
But there is a caveat (as with any other form of investment product). The Vomma Zone does not guarantee that all trades will earn returns. There is always the risk of losing money from the investment recommendations, which further cements the assertion that it is real. Ultimately, predicting price movement through market timing is never going to be an exact science. Past performance is not necessarily indicative of future success.
Vomma Zone Verdict
Vomma Zone is a presentation by Don Kaufman of TheoTrade where he promotes his Retirement Protection Kit.
The trading strategy he uses involves analyzing market volatility, which in 2020 has been plentiful, and using that to trade options with a higher chance of earning significant returns. He claims that we have a few more months to cash in on those trades and it will be interesting to see how it pans out.
If you purchase the Retirement Protection Kit, do not expect to secure your retirement using a few trades strewn over a few months. It is not as straightforward as Don makes it out to be. Therefore, be careful and don’t invest more than you are willing to lose.
Before you leave
If you’re tired of scams and want a real solution for making money online check out my no.1 recommendation.
It’s helped me earn over $300,000 in the last 12 months alone:
Go here to see my no.1 recommendation for making money online
(This is a 100% free training)
David Fortune has been the editor NoBSIMReviews.com since 2019. He is an expert at writing content on stock advisory services, side hustles, reviewing online business opportunities and many more topics. You can learn more about David on our about us page.