Calendar Spreads

Rally,

Is there a possible scenerio where you could not roll the VIX shorts for even? For example, a VIX spike near expiration where the next month calls are worth less than the current month? Since you can't exercise your longs, how would you handle this? It is a hard thing to analyze because until you are in that situation you would not see the bid/ask.

Tim

Quote from rallymode:

You do know today is the last trading day for july right? are you rolling your 17.5 to aug? You probably opened that at the vix lows and now you can roll and scratch.

If you keep doing these calendars i suggest you open them on the spikes(market selloffs) and push your short strikes as high as possible. If the vix makes a sharp move up, your longs wont gain much but due to the fact that the front months trade with the futures and are discounted to the actual VIX value, you can roll them out usually for a scratch.

Of course, if we crash and vix spikes 30+, you will lose alot of edge on these ITM rolls. Also, we will be in a different ball game so size your risk accordingly.
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Quote from dqtmg2:

Rally,

Is there a possible scenerio where you could not roll the VIX shorts for even? For example, a VIX spike near expiration where the next month calls are worth less than the current month? Since you can't exercise your longs, how would you handle this? It is a hard thing to analyze because until you are in that situation you would not see the bid/ask.

Tim
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Talk about bringing topics back to life lol Yes, thats the risk that comes with euro style options. It was a play on skews. In the case we had a while back when i brought it up, only a crash type scenario(VIX>30) would've caused any more serious losses where the next month out option would get discounted to the front month - the edge. The breakevens were very very wide, something like 12-28 on the VIX. Very nice risk profile IMO. I dont recommend doing it now as the skews are not there.
 
Yes it is an old topic, but I have been looking at it recently. I am looking at a Oct/Feb 20 Call Calendar now showing BE from 13-40 so I must be looking at a different trade than you. What skews did you see before when you were trading VIX?


Quote from rallymode:

Talk about bringing topics back to life lol Yes, thats the risk that comes with euro style options. It was a play on skews. In the case we had a while back when i brought it up, only a crash type scenario(VIX>30) would've caused any more serious losses where the next month out option would get discounted to the front month - the edge. The breakevens were very very wide, something like 12-28 on the VIX. Very nice risk profile IMO. I dont recommend doing it now as the skews are not there.
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Quote from dqtmg2:

What skews did you see before when you were trading VIX?
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Tenor skew, 80% in the back months, 150% in the front months is what i traded. I think your breakeven calculation is way off. What software spit that out? If VIX hits 30, the oct/feb 20 long calendar will be in the red. No way, is your debit cushioned all the way to 40, not at these volty levels anyway. At 40, you will be losing much more than your debit in my calculation. Back months wont move enough to offset the front months. Last time i checked, no software out there could properly model the forward variance embedded in these options.
 
SP Oct/Nov 1275/1290 put diag is now at -35 with the SP now at 1347. Unfortunately theta is against me and will continue to lose unless it moves down to below 1235.
 
I know this is like watching paint dry, but here goes:

market below 1340, and vix is up over 12.75 so the position has moved from a loss of 35 to a gain of about 35.

Again, this strategy allows large moves without forcing me out, and I was able to wait it out for the move down.

I am not convinced that we are going to see much downward movement.
 
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