Noob VIX Futures Options Questions

[MidwesternTrader]

Also, you might want to consider resting sell orders on part of your position. That will stop you from missing a quick volatility spike (and keep you exposed with the remaining position to higher moves).

Good advice, I'll set some of the position to capture a quick spike. Or maybe setup a ladder at progressively higher prices to try and maximize a larger spike scenario.

 

[beerntrading]

Good advice, I'll set some of the position to capture a quick spike. Or maybe setup a ladder at progressively higher prices to try and maximize a larger spike scenario.

That's what I do too, though, usually I close out because the highest sell order is well above what's likely to occur.

You have a bit more flexibility on the long side since you don't have to worry about the short legs pinning you for the spread is it closes at the wrong price. But the size of the move you have to catch to make that strategy play out over time works against my purposes (some quick cash to offset my losses on my bullish portfolio)...plus the nerves of steel this requires.

 

[tommcginnis]

Follow up. I executed this trading idea on Friday five minutes before close. I put a .15 bid on the VIX JAN 24 14.50 to purchase 10 calls and got a fill. Total cost of position with commission $160.00.

But will need a big chain of events for the VRO to close above 14.50 on 7:00AM Wednesday to execute a positive expiry for the trade. Some outside events needed to help kick off a major selloff on Tuesday.

• USA Government shut down impasse continuing would help
  
• Another outside economic or political news event occurring over the weekend or early Monday
  
• Markets moving moderately / strongly lower on Monday
• Followed by a larger profit taking sell off on Tuesday
• Then final the Wednesday 7AM VRO number settling higher than 14.5 to force a payout on the calls

I don't think you'll make this. But BOY do I hope you do.
I would watch ES volume -- there has been a pattern of big *squeeze* sales in recent V-bottoms, and if something sparks a run down in the market, that big volume "Help meee-eeeee!" spike should mark the top of the local VIX -- and the top of your VIX options. I'd pluck right there -- whether 13.5, 14.5, or 15+.

BEST WISHES.

(*Really?!?!? 15¢????? Awesome.)

 

[truetype]

Follow up. I executed this trading idea on Friday five minutes before close. I put a .15 bid on the VIX JAN 24 14.50 to purchase 10 calls and got a fill. Total cost of position with commission $160.00.

But will need a big chain of events for the VRO to close above 14.50 on 7:00AM Wednesday to execute a positive expiry for the trade. Some outside events needed to help kick off a major selloff on Tuesday.

• USA Government shut down impasse continuing would help
  
• Another outside economic or political news event occurring over the weekend or early Monday
  
• Markets moving moderately / strongly lower on Monday
• Followed by a larger profit taking sell off on Tuesday
• Then final the Wednesday 7AM VRO number settling higher than 14.5 to force a payout on the calls

You're overthinking it. Stick to your system.

 

[MidwesternTrader]

I don't think you'll make this. But BOY do I hope you do.
I would watch ES volume -- there has been a pattern of big *squeeze* sales in recent V-bottoms, and if something sparks a run down in the market, that big volume "Help meee-eeeee!" spike should mark the top of the local VIX -- and the top of your VIX options. I'd pluck right there -- whether 13.5, 14.5, or 15+.

BEST WISHES.

(*Really?!?!? 15¢????? Awesome.)

Very much odds against (95% against??) any thing comes of this, but that is why they cost .15 cents. I think the fill was made by some program trading system looking at discrepancies in VIX option Bid / Asks. The Bid / Ask at the time was .10 / .20. When I put in the .15 bid, it was instantly hit, so I'm guessing a program picked up the spread shrinking and it filled all 10 calls.

 

[MidwesternTrader]

You're overthinking it. Stick to your system.

You're right. If it works, it doesn't matter why it worked. If I can pick these ups for .15 a call each Friday afternoon (big if though), try it for a period of times and see how it goes. It only needs to hit once to be long term profitable at .15 a call.

 

[i960]

Just a few observations here...if the VIX spikes, even if it gets as high as 25, you will not be able to get out at this price (i.e. You will not get $10 of intrinsic value...You'd be lucky to pick up $2 or 3 in "intrinsic" value unless it's this week's expiry). Read up on this point with CME, because they will never be accurately modeled by options calculators designed for stocks or indices (VIX notwithstanding)...the sole exception to this is settlement, which brings me to:

This is only the issue if one is paying attention to the VIX itself as a source of intrinsic value to their options - which they sure as hell shouldn't be. Unless one has some specific expiring contract settlement concerns they should be paying attention to the futures first and foremost.

 

[beerntrading]

This is only the issue if one is paying attention to the VIX itself as a source of intrinsic value to their options - which they sure as hell shouldn't be. Unless one has some specific expiring contract settlement concerns they should be paying attention to the futures first and foremost.

Even against the futures they won't show true "intrinsic" value...In fact they're unlikely to trade at / above "parity" until expiration. The VIX itself is already a second derivative product, the options thereon are third derivative.

 

[sle]

some specific expiring contract settlement concerns

well...