Shooter short vol

S

shooter

My last journal was experimenting with short VXX and hedging on spikes. This journal will also be short vola but mainly in options and hedging in the underlying and weeklies. I won't get into exact positions but I'll post realized/unrealized p/l from my IB window.

Like everyone else I think this market is 'safe' until Yellen makes a comment that shakes up taper expectations. 'Seasonally' I think short vola is safe through the end of the year. I do recall in recent years there have been a few events that had potential to cause some volatility spikes however. The Dubai World bankruptcy was a headline on a Thanksgiving morning that luckily didn't transpire into anything major, although the futures took a temporary dive. A guy tried to blow up a flight in Detroit(?) on a Christmas day 2 or 3 years ago also. There are probably others I'm missing. I suppose I point those out just to 'prepare' for the unknown event I might wake up to. I'll already have hedges to execute automatically...hopefully there is liquidity.
 
Quote from shooter:

My last journal was experimenting with short VXX and hedging on spikes. This journal will also be short vola but mainly in options and hedging in the underlying and weeklies.
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Why did you change from VXX to options?
 
More importantly, what is the point of not discussing your trades/methodology (without getting into proprietary aspects) and only posting your p&l?
 
In the last journal the posts were mainly 'buying VXX partial hedge at 16.50', which IMO don't make much sense unless you were trading the exact same overall position I was. i.e. I was net short 1,000 VXX overall but I'm buying in 200 here at 16.50. Rather I'll say 'adding bearish vertical' or something, and post the corresponding p/l.
 
for what its worth..i believe vol will spike during first week of dec., then it rides down in to the usa holiday's.

since usa vol has dropped so much from your gov shutdown i would not be simply short it right here as it may ramp again soon.
 
Quote from shooter:
Rather I'll say 'adding bearish vertical' or something, and post the corresponding p/l.
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Ah, I see. I rarely read journals here unless I am really bored, but I feel it's the view, the analysis/motivation behind the view and the expression of the view that are interesting. E.g. you'd say "vxx is rich here because the roll-down will persist given the shape of the curve, thus i am adding Dec bearish vertial". This way, the crowd could discuss the analysis (e.g. "no way, man, vol is way cheap here") or the expression of the view (e.g. "no, don't add a put spread, rather add a call 1x2 to leverage on the skew").
 
tradingjournals, I changed because I'm more familiar with options than VXX.

NKVI>NH, are you expecting a NFP 'surprise' in the first week of Dec?

sle, I'll try to add as much analysis/motivation as I can. Generally though I think Bernanke and hopefully now Yellen have created an environment safe for short volatility/premium, similar to '04-early '07. I think I'll be able to adjust my positioning from short volatility to short deltas when the next bear move occurs. I've tested a lot on hedge frequency and costs to come up with something I'm comfortable with.
 
Quote from shooter:

tradingjournals, I changed because I'm more familiar with options than VXX.

NKVI>NH, are you expecting a NFP 'surprise' in the first week of Dec?

sle, I'll try to add as much analysis/motivation as I can. Generally though I think Bernanke and hopefully now Yellen have created an environment safe for short volatility/premium, similar to '04-early '07. I think I'll be able to adjust my positioning from short volatility to short deltas when the next bear move occurs. I've tested a lot on hedge frequency and costs to come up with something I'm comfortable with.
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i have no set event in mind; just in many yrs of vol trading see patterns of vol and i expect a pop early december give or take a week. i'm reducing exposures here with that in mind; but i do not trade vxx type stuff... i like the higher vol in asia to play ebbs, flows.
 
Quote from shooter:
sle, I'll try to add as much analysis/motivation as I can. Generally though I think Bernanke and hopefully now Yellen have created an environment safe for short volatility/premium, similar to '04-early '07. I think I'll be able to adjust my positioning from short volatility to short deltas when the next bear move occurs. I've tested a lot on hedge frequency and costs to come up with something I'm comfortable with.
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Sorry, do you mean that you are going to short some vol here and have a short delta lean or that you are going to short vol now and hedge your delta when/if the market tanks?
 
Yeah, short vol now and hedge when/if it tanks. I think starting with short delta lean would make sense if I was opening a position with VIX north of 20.
 
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