Long or Short Vega ?

circadian · Feb 16, 2009

Quote from jwcapital:

An interesting observation: The VIX at 820 (the ES close on 2-13) is lower than when the ES closed at 863.25 on 1-12. Looks to me that traders are getting used to being kicked in the nuts. So, an iron condor approach or even a bull put spread (DOTM) looks good here. As long as the ES stays rangebound--these strategies or similiar ones look good.

Being short volatility when the S&P is only 10 pts above 800 seems a little too contrarian, even for my tastes. When I see these periods of VIX complacency, it really gives me a creepy feeling that something ill is about to go down, but this is just my humble opinion. I guess we'll see.

dagnyt · Feb 16, 2009

Quote from SmithTheTrader:

Mark,
Seemed like today is another good day for your RUT IC , congratulation !! ..

I just feel gun shy to pull my trigger to get into the position now as it may be a bit late,.. ..

To me the 'congrats' comes only after the position is closed and the risk is eliminated.

If guy shy, then so be it. You DO NOT want to force trades. You want to trade when you are comfortable with the trade: That means the risk and potential reward are both acceptable.

Mark

SmithTheTrader · Feb 17, 2009

Quote from dagnyt:

To me the 'congrats' comes only after the position is closed and the risk is eliminated.

If guy shy, then so be it. You DO NOT want to force trades. You want to trade when you are comfortable with the trade: That means the risk and potential reward are both acceptable.

Mark

You are right, the risk/reward for IC don't seemed very attractive to me this time, the premium collected is low and the IV seemed to me in lower range now..

I am in sideline this time..

circadian · Feb 17, 2009

Quote from circadian:

When I see these periods of VIX complacency, it really gives me a creepy feeling that something ill is about to go down, but this is just my humble opinion. I guess we'll see.

VIX complacency strikes again!
:eek:

SmithTheTrader · Feb 17, 2009

Quote from circadian:

VIX complacency strikes again!
:eek:

Agreed - Seemed Vix is on the way back to 50+ range, hey man, i like this kind of volatility

circadian · Feb 17, 2009

Quote from SmithTheTrader:

Agreed - Seemed Vix is on the way back to 50+ range, hey man, i like this volatile market

Yes indeed. I think that it is important for people to remember that volatility begets volatility, and the VIX is still at historically elevated levels. 40 is the new 20 for the VIX, so I would be a buyer and not a seller of Vega at the lower 40 levels. This morning's action is still extremely complacent in light of the S&P levels. These giant birds with their heads in the sand will have to come to grip with reality sometime. We're way overdue for a nice, vertical VIX spike.

dagnyt · Feb 17, 2009

Quote from circadian:

Yes indeed. I think that it is important for people to remember that volatility begets volatility, and the VIX is still at historically elevated levels. 40 is the new 20 for the VIX, so I would be a buyer and not a seller of Vega at the lower 40 levels. This morning's action is still extremely complacent in light of the S&P levels. These giant birds with their heads in the sand will have to come to grip with reality sometime. We're way overdue for a nice, vertical VIX spike.

I don't think it's 'overdue' but I would not be surprised to see VIX rise.

If that happens, it's an opportunity to sell more vega (in small amounts) - but only with strategies that have limited risk.

By giant birds, are you referring to condors? they aren't that large. Heads in the sand? I'm unaware of the ostrich spread.

Mark

circadian · Feb 17, 2009

Quote from dagnyt:

By giant birds, are you referring to condors? they aren't that large. Heads in the sand? I'm unaware of the ostrich spread.

Mark

To clarify:

Giant bird with head in the sand = OSTRICH

OSTRICH SPREAD = Shorting volatility near 52 week lows and being long of large, sandy holes.