Anyone trading the VIX?
- Thread starter Eliot Hosewater
- Start date
I forgot to warn everyone. Since I closed the long Sep, expect the VIX to rise - i.e. markets will tank.
Last Friday, with the VIX at nearly a 52 week high, I decided to take a chance on a ratio spread. I bought the Aug 25 Calls and sold the Aug 30 Calls for a ratio of approximately 1:2. I also sold some of the Aug 40 Calls.
Today, with the sharp drop in the VIX, I closed out all legs for a profit.
I would absolutely NOT recommend this type of trade for those who are unfamiliar with the VIX. I almost would not recommend it for myself.
LOL. Anything from the high 30s and above would have resulted in a loss - and a market crash would have resulted in a major loss as the VIX could easily hit the 50s.
Good luck to all and be sure to do your DD when trading these options.
AZD
Today, with the sharp drop in the VIX, I closed out all legs for a profit.
I would absolutely NOT recommend this type of trade for those who are unfamiliar with the VIX. I almost would not recommend it for myself.
LOL. Anything from the high 30s and above would have resulted in a loss - and a market crash would have resulted in a major loss as the VIX could easily hit the 50s.Good luck to all and be sure to do your DD when trading these options.
AZD
well, what seems interesting with the VIX options is the fact that VIX is mean reverting (tends to move back toward its historical average in due time). That's the reason why the short term futures have a higher value than the long-term one (inverted vix term structure). But this should not last for very long and we should get back to a flat to upward term structure within a couple of months. The underlying of the vix options is the forward vix not the spot vix. Knowing all of that, isnt there a way to play the vix term structure movements to my advantage using options?
it seems like what you really want to do is calendar spread the futures via spot. ie sell sep07 against long nov07.
that will keep things simple.
remember when dealing with vix options you are also dealing with varying volatilities of VIX in successive months.
how about buy a put 20 sept and sell a put 20 november, a lot less risky if the VIX spikes, with the same profit profile if the term structure comes back to flat or upward.