riskarb's trading journal

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Phil,

Quick question: if you had bought vanilla SPX PUTs with equal dollar value and roughly matching tenor, would you have had better or worse gains from the recent correction and VIX spike compared with your VIX calls?

Quote from optioncoach:

I think the suggestion would be to combine short ES and some VIX calls to hedge against sudden drops in the index and slow bleeds as well. I may not have a specific correlation between market drops anf VIX increases but they are negatively correlated on fast moves such as the last few weeks and on slow moves the ES shorts will hedge.

I know the barrier is gamma heavy and a slow move will require more ES shorts to hedge on the way down. However the few times the market drops quickly, the VIX hedge should work out as a nice cheap insurance policy for times like last week and like post-Katrina. I think you can spend a small amount of the potential profits and let it sit potentially. it is still a new product but it is providing some interesting partial hedges for quick volatile drops.
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Hard to say exactly because I cannot back into where a $1.75 put on the SPX would have been at the time or even a $17.50 Put. However, VIX can move further from a smaller drop in SPX if the expectations and fear pick up and the VIX hedge is to really hedge against a large short-term drop in the SPX, not a hedge on any downward move. It is an attempt at black swan insurance.

The recent drop in the SPX was by no means a black swan event but the calls did move nicely nonetheless. If the spike was more sudden and less orderly, it would be interesting to see how they would operate then.

Quote from momoneythansens:

Phil,

Quick question: if you had bought vanilla SPX PUTs with equal dollar value and roughly matching tenor, would you have had better or worse gains from the recent correction and VIX spike compared with your VIX calls?
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Quote from riskarb:

SGX Nikkei 30d put vol is trading at 32% for July. Any insignificant rally will drop the vols to mid-20s -- 60 ticks on the 13750 puts.

The 13750 1x3 [synthetic pitchfork] is a b/e at the strike at static volty. The current atm[14500P] is 2x the premium.

Short 1 SGXNK Sep future at 14525 // Short 3 SGXNK July 3750P at 228

Futures gain at strike: 7.50
Options loss at strike: 7.50

Carrying -35 vegas. 9x30 short. I sold the 30 at a PF credit of 1450: subtract strike from spot and add put premium. Subtract spot from strike if trading calls.
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Paid 99 on 30... bought 9 at 14820. Traded another 20 for a seg account.

+$4,700 net of comms. Flat position.
 
Quote from riskarb:

CME Straddle:

Sold 50 CME June 450 synthetic straddles [short spot x 450p, 1x2] at 33%vol, $24.80 natural. I expect that we'll touch 30% vol within a week and hover within 12 handles of the 450 strike. Spot = $455-56 currently.
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Bought stock this morning at $455. Friday's trade saw me assigned on the calls, earned a buck on the trade, but not posing the PnL from that transaction. GOOG made 4 points and change.

On the 50 synthetic straddles -- bought $455 average on the above spot-trade as well.

+99,000 net of comms.
 
Quote from IV_Trader:

Very high ratio between V-Dax and US VIX this morning , almost 50%. Would you consider an exotic DAX-SPX correlated bet at this point ? BOM shows 27$ to win 100 on 5297/14d NO Touch and only 18$ to win 100 on 1217/14d Touch on SPX. Both 5297 and 1217 are exactly 3% below the current prices.
Thanks , B

Notice that the bet's premiums carry the same as vols 50% ratio
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"position" update : 45 debit is currently 53$ , gains comes from shifting of Touch bet toward the strike and partially of the vols ratio reverting to the mean.
B , let me know if you don't want this staff here , I will delete it , no prob.
 
Questions that anyone may answer from a new kid:

1) What is Kurtosis?

2) What is an "exotic option" or "vanilla option"?
(I did not know they are available in different flavors)



:p
 
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