What makes you think I don't understand the instrument?
BTW, Buffet would not sell puts for SVXY but for different reasons - it's not a company but a bunch of VIX futures.
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Selling puts on SVXY
- Thread starter rocky_raccoon
- Start date
What makes you think I don't understand the instrument?
BTW, Buffet would not sell puts for SVXY but for different reasons - it's not a company but a bunch of VIX futures.
Quote from rocky_raccoon:
No, I am not trolling. Limited risk is the exact reason I would rather sell puts on SVXY than calls on VIX.
you need to start digging a little deeper Rocky... you have been messing around with these products for a while in a very superficial manner for a long time.... build a rudimentary model to trade against and talk about that.... welcome criticism... it does seem you are asking for help right?
Quote from rocky_raccoon:
No, I am not trolling. Limited risk is the exact reason I would rather sell puts on SVXY than calls on VIX.
Ha, so the bound to zero risk of selling the 90P is a "selling point" on this strategy. Yeah, sounds like an edge to me. The Jun90C is 4. Sell the calls, not the puts.
Quote from atticus:
Ha, so the bound to zero risk of selling the 90P is a "selling point" on this strategy. Yeah, sounds like an edge to me. The Jun90C is 4. Sell the calls, not the puts.
Sell the calls on SVXY? Why? It drifts higher as long as there is a contango in VIX futures. Selling puts makes more sense. Besides, I don't say to sell then now and choose ATM strike. No, sell when SVXY grops below 80 and go 10% OTM at least.
Now, let's talk about possible scenarios.
If S&P drops 2-4%, SVXY may drop 20% like it did a month or two ago. It recovered quickly along with S&P rebound.
If S&P drops 20% in a week SVXY may go down 80% just like XIV did in 2011. That's still way above zero although not very comforting. More over, once VIX futures start to come down after the spike the contango will settle in and propel SVXY higher.
If S&P drops 90% in a week we will have a lot bigger fish to fry than to worry about pesky SVXY.
I think that first scenario is the most possible, second is possible but not very likely as long as Uncle Ben is printing, and third would require a world-wide catastrophe.
Put selling is just a way to get the shares at a discounted (from today) price. I consider SVXY (and similar instruments) as non-expiring call on S&P: Instead of buying $6 worth of SPY with $6 at risk, buy $1 of SVXY and keep $5 in cash to get similar performance.
Quote from rocky_raccoon:
Sell the calls on SVXY? Why? It drifts higher as long as there is a contango in VIX futures. Selling puts makes more sense. Besides, I don't say to sell then now and choose ATM strike. No, sell when SVXY grops below 80 and go 10% OTM at least.
Now, let's talk about possible scenarios.
If S&P drops 2-4%, SVXY may drop 20% like it did a month or two ago. It recovered quickly along with S&P rebound.
If S&P drops 20% in a week SVXY may go down 80% just like XIV did in 2011. That's still way above zero although not very comforting. More over, once VIX futures start to come down after the spike the contango will settle in and propel SVXY higher.
If S&P drops 90% in a week we will have a lot bigger fish to fry than to worry about pesky SVXY.
I think that first scenario is the most possible, second is possible but not very likely as long as Uncle Ben is printing, and third would require a world-wide catastrophe.
Put selling is just a way to get the shares at a discounted (from today) price. I consider SVXY (and similar instruments) as non-expiring call on S&P: Instead of buying $6 worth of SPY with $6 at risk, buy $1 of SVXY and keep $5 in cash to get similar performance.
How are those puts doing today? SPX loses 100 and you're looking at a mid-70 figure on SVXY. Please do it. We can dance on your (metaphoric) grave.
You don't sell upside calls (downside puts) on VIX. It's beyond moronic. It's not a f*cking stock. The worst thing about this discussion is that you're not trolling and you're serious.
On ignore.