To say short vol traders finally received their comeuppance is the understatement of the century. The CBOE Volatility Index (VIX) skyrocketed 115% to 37.32 in a squeeze that blew out legions of traders carrying short volatility positions. The rocket ship rise officially notched a new record for the largest one-day increase in the VIX ever seen. It even trumped all one-day fear spikes witnessed during the 2008 market slide. Forced liquidations plagued products like XIV and SVXY after hours while driving their long volatility cousins like VXX and UVXY to the moon.

I have a million things to say about today’s crash – and yes, I think an intraday Dow drop of 1,600 points (-6.2%) undoubtedly qualifies as a crash. While I’ll unpack more in Thursday’s Cash Flow club, here are my top three takeaways.

Bid-Ask Spread Blowout

When volatility rages, bid-ask spreads for options contracts widen dramatically. So much so that they become almost untradeable. Just take a gander at the options chain for any major stock or ETF. Typically options on SPY, for example, have a bid-ask spread of 5 to 10 cents. Now? How about a $2 to $4 bid-ask spread!

Using a market order during such turmoil is insanity. If you have standing conditional orders designed to close naked puts or bull put spreads with a market order if your stock falls below a certain price, I highly – highly! – recommend trying to exit with a limit order when the market is open. Market orders in this environment are sure to receive really crappy fills.

The Risk in Short Vol Trades is Always Asymmetric

When selling volatility (via short option plays like naked puts and credit spreads or volatility ETFs and ETNs like VXX, UVXY, SVXY, XIV, etc…), the potential risk is always larger than the potential reward. Some refer to this gambit as picking up pennies in front of a steamroller. The upside is the pennies are easy to collect, and most of the time the steamroller is easy to avoid. But as today’s action attests, that pesky steamroller is subject to sudden and unpredictable acceleration – the type that breaks bones and hearts.

The Complexity and Crowding in Volatility Products has Finally Come Home to Roost

VIX related trading instruments are arguably the most complex products available to trade. And yet, the ease with which short volatility strategies have minted money has brought all the boys to the yard. Here’s a Business Insider article about a Target store worker who supposedly grew his net worth to $12 million smackers using such an approach. Today’s volatility squeeze was enough to blow many unsuspecting traders to smithereens. Just ask any caught long SVXY and XIV into today’s bloodbath which sent both from $120 to $15.

The takeaway? Don’t trade complicated derivatives products that you don’t understand.

The Bounce Will Be Vicious

I’m doubling down on my Options Report commentary over the weekend. The elevated VIX suggests a bounce in stocks is imminent. But as today’s swoon will attest, being just one day early can be mighty painful. With S&P 500 futures down another 2% after hours, we may see enough blood at tomorrow’s open to spark a sustainable bounce. I shudder to think where the VIX will be if tomorrow follows today’s path. One thing is for sure, though. With a VIX now flirting with 40, fireworks are guaranteed.