Anyone trading the VIX?

E

Eliot Hosewater

I've never traded it.

I just "bought" 1 calendar for .90 credit.

Aug 22.50 is bid/ask 4.90/5.10, Sep 3.50/2.90.

The TOS risk graph shows all positive at expiration.

Is this free money?

Correction: it got filled at 1.10.
 
no it isn't free money.

I'd suggest getting more familiar with VIX before trading it. I trade it constantly, but it took me quite a while to get used to it.

Forward pricing of options means that options no longer have an applicable intrinsic value. That is, a call that is $3.00 ITM can be valued at only $2.00. This makes them behave very strangely in regards to time spreads of any kind. It is very common to see a debit calendar listed for a credit. This is not free money. The credit will just get bigger and bigger as the index runs against you.

IOW, your short front month can sit there and lose money without the long back month even moving a penny. Then when your front month expires at a loss, the back month will collapse and you'll lose there too. The risk graph is not even close to accurate.
 
Quote from Cache Landing:

no it isn't free money.

I'd suggest getting more familiar with VIX before trading it. I trade it constantly, but it took me quite a while to get used to it.

Forward pricing of options means that options no longer have an applicable intrinsic value. That is, a call that is $3.00 ITM can be valued at only $2.00. This makes them behave very strangely in regards to time spreads of any kind. It is very common to see a debit calendar listed for a credit. This is not free money. The credit will just get bigger and bigger as the index runs against you.

IOW, your short front month can sit there and lose money without the long back month even moving a penny. Then when your front month expires at a loss, the back month will collapse and you'll lose there too. The risk graph is not even close to accurate.
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Thanks. That's why I only did 1 contract.

Nothing like real money to get experience.
 
Quote from Eliot Hosewater:

Thanks. That's why I only did 1 contract.

Nothing like real money to get experience.
More...

You must;ve legged into it? If I recall correctly, TOS doesn't allow a debit calendar to be opened for a credit if you enter it as a spread trade. The trade is essentially imposible to determine a max risk, so they treat it like a naked position.
 
Quote from Cache Landing:

You must;ve legged into it? If I recall correctly, TOS doesn't allow a debit calendar to be opened for a credit if you enter it as a spread trade. The trade is essentially imposible to determine a max risk, so they treat it like a naked position.
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No, I did it as a single order. The was a warning in red at the bottom of the window saying the VIX has special risks and that I should know what I am doing.
 
Quote from Eliot Hosewater:

No, I did it as a single order. The was a warning in red at the bottom of the window saying the VIX has special risks and that I should know what I am doing.
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LOL
 
You sold index vol. Not the end of the world as long as its what you intended to do. The edge has gotten so wide it's insanity to trade vix derivs at the moment, and thats from someone who trades nothing else. FYI, the front month futures switch was inverted 4 handles earlier.

Be careful out there and dont trust TOS vix risk profiles. I give you 3:1 odds you lose money on this trade at unbounded risk.
 
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