Riding the volatility dragon

By Jerry Wagner

Picture this: A dragon, black as a storm cloud, soars above a burning battlefield—scales flashing, wings blocking out the sun.

The rider leans forward, steering straight into the fight below, calm and controlled. Suddenly, the course of the battle turns.

That image—from HBO’s “Game of Thrones” and its prequel, “House of the Dragon”—has captivated millions. The appeal isn’t safety. It’s fire, fury, and unpredictability. But with a rider, that raw power can become a strategic and tactical force.

In financial markets, volatility is that dragon—unpredictable, powerful, and always lurking. The challenge is not to avoid it but to learn how to ride it effectively.

The same idea applies to risk management. It’s just as the ancient Chinese proverb states:

“If you ignore the dragon, it will eat you. If you confront the dragon, it will overpower you. If you ride the dragon, you take advantage of its might and power.” 

Three ways investors face volatility, each with its own fate

Every investor who has ever faced a turbulent market has made one of three choices.

Ignore the dragon

In calm markets, risk is easy to forget. Crashes in 2000–2002, 2008, and 2022 hurt investors who became complacent, letting the dragon sleep in their portfolios without considering the consequences of its awakening.

Confront the dragon

Market timers and panic sellers often respond emotionally, buying at tops and selling at bottoms. They fight volatility rather than manage it. The dragon isn’t moved by emotion.

Ride the dragon

Respect volatility by understanding its patterns and timing. Then build a disciplined process with skilled management. Act purposefully, neither recklessly nor timidly.

For more than 45 years, Flexible Plan Investments (FPI) has been refining, testing, and building ways to ride volatility on behalf of advisers and their clients.

The dragon investors rarely discuss

Volatility is often treated as an enemy to minimize. This misses the point: volatility drives returns.

Without volatility, there is no trend to capture or opportunity to pursue. The equity risk premium exists because stocks are volatile and investors expect compensation for taking risk. Seeking no volatility means accepting no return premium.

The real risk is unmanaged volatility—the kind that can quietly compound and turn paper losses into permanent ones once fear takes over.

Dynamic risk management is designed to address volatility with process, discipline, and tools, making the challenge of riding it less frightening and more purposeful.

The dragon rider’s kit

No dragon rider succeeds on courage alone. At FPI, more than 45 years of managing risk across market regimes—bulls, bears, crashes, and surprises—have shaped the tools we use to ride volatility.

The saddle: Rules-based process

Decisions made before the pressure arrives—before the headlines scream, before the client calls in a panic. Rules help remove emotion from decisions best made before pressure builds.

The reins: Volatility targeting

Our proprietary Targeted Volatility Analysis (TVA) continuously adjusts exposure—more when conditions support it, less when they don’t. It is a process of constant, active calibration.

The shield: Hedging and defensive positioning

FPI uses short-term Treasury exposure, cash allocations for deteriorating assets, inverse instruments when appropriate, and tactical overlays that can limit equity exposure when market conditions weaken. All are designed to shield portfolios from harmful market volatility.

The map: Diversification and asset-class rotation

The Evolution momentum algorithm ranks and weights 12 leveraged asset classes and cash by momentum, risk, and correlation—moving weaker assets aside when trends break down.

Together, these tools reflect a core belief: Managing investments is as important as owning them.

Three ways we ride the dragon

FlexDirex ETF strategies

If volatility is a dragon, a 2X leveraged single-stock ETF is a fire breather. Think 2X Tesla (TSLL), 2X Nvidia (NVDU), 2X Palantir (PLTU), and 40 more of the same breed. These instruments can move 10%, 20%, or more in a single session. Unmanaged, they can be instruments of success or destruction.

FlexDirex—our first-to-market suite of actively managed SMA strategies built from Direxion’s universe of more than 40 single-stock leveraged and inverse ETFs—applies TVA targeting, SHY Treasury hedging, and the Classic overlay to help manage exposure when the dragon bucks hardest. Two strategies are available: FlexDirex Focused Core (FDXSE), which targets S&P 500 volatility, and FlexDirex Tech Plus (FDXNE), which targets NASDAQ 100 volatility. Both are designed to capture the upside volatility of the indexes while seeking to limit their drawdowns.

QFC Evolution Plus mutual fund strategies

FPI’s Evolution Plus strategies have been available for more than a decade, with the QFC version available since 2020. Today, QFC Evolution Plus allocates primarily to the Quantified Evolution Plus Fund (QEVOX) across five risk profiles, delivering dynamic risk management at both the fund and strategy levels. Affiliated fund fee credits can reduce FPI’s advisory fee to as low as 0%.

The Quantified Evolution Plus Fund (QEVOX)

QEVOX, subadvised by FPI, gives investors direct access to the Evolution momentum framework. Gold, commodities, currencies, real estate, bonds, and equities all respond to unique pressures. QEVOX ranks leveraged investments in each of these asset classes by momentum, weights positions by volatility and correlation, and shifts deteriorating asset classes to cash to create a diversified, hedged, and leveraged portfolio.

The power—and risk—of riding volatility

FlexDirex strategies have delivered strong after-fee results in the current environment, with our most aggressive profile returning about 90% year to date. Final composite performance figures will be available following the standard reporting period.

The Quantified Evolution Plus Fund (QEVOX) has returned more than 55% year to date after fees through May 29, 2026—in a year when the S&P 500 has been … volatile. As a result, the QFC strategies using it have delivered returns for the Conservative to Aggressive SMA portfolios ranging from 9% to 49%, after fees are deducted.

These results do not happen by hiding from volatility. They happen by participating in powerful market moves with tools built to manage the accompanying risks. They do not mean every future period will look like this one. Leverage cuts both ways. These strategies are not for every investor. They belong where they fit the client’s objectives, risk tolerance, time horizon, and portfolio role. And as with any investment strategy, past performance does not guarantee future results. Investment return and principal value will fluctuate.

The dragon rider’s creed: Don’t ignore the dragon. Don’t blindly fight the dragon. Respect it. Measure it. Manage it.

The goal is not to slay the volatility dragon. The real goal is disciplined volatility management—with a skilled manager guiding the journey.

The greatest Targaryen riders built bonds through knowledge and engagement with dangerous power. Advisers serve clients best not by promising to eliminate risk, but by partnering with managers who have built robust tools and discipline to stay committed through volatility.

Since 1981, FPI’s purpose has not been to predict markets. It has been to tame and ride them with discipline, tested processes, and experience for clients who trust us with their journey.

The volatility dragon is already here among us. Clients deserve an experienced rider who knows what to do when it takes flight.

To learn more about FlexDirex ETF strategies, QFC Evolution Plus strategies, and the Quantified Evolution Plus Fund (QEVOX), contact our Sales team at 800-347-3539 or visit flexibleplan.com.