From early March through last Friday, there were really only a few ways to make any profits in the S&P 500 Index (SPX), and looking at which strategies have been working gives us a good sense for the character of this market. First, let's take a look at price action over this period. SPX went basically nowhere:
1. Owning deltas means profiting from a directional move in the underlying. Owning deltas, whether positive or negative, was not a winner over this period. The market made a round trip back to 1,540.
2. Owning gamma (by buying calls or puts, or both) means profiting from convexity. It's analogous to a trend-following strategy in which you commit more capital as momentum builds. That didn't work well, either: the carrying costs in early March were recovered on the trip to 1590, but then given up (and then some) when the market reversed.
3. Theta is the cost of owning that convexity. Being long theta / short gamma worked in March and we'll come back to this.
4. Owning vega means profiting when implied volatility in an option rises. This is where a lot of people will put up a chart of CBOE Volatility Index (VIX) and say: see, implied volatility exploded, VIX moved from 13 to 18! But that ignores the roll down costs associated with a real product. Instead, look at how May VIX futures traded over this period: they fell from 16.50 to 14, and then rallied back above 17. That means being long vega saw a drawdown during the period more than twice the size of the eventual gain. If you closed out a long May VIX position on Friday, you did so profitably but only after some rough trading.