Short Vega

S

Sashe

Are there any plays to short vega directly besides trading the reverse calendar spreads (long front month, short longer term calls)? direct shorting of the VIX or VIX calls unaccetable since I am interested in shorting vega @stocks.
LDK would be a good example at the moment.
 
Quote from Sashe:

Are there any plays to short vega directly besides trading the reverse calendar spreads (long front month, short longer term calls)? direct shorting of the VIX or VIX calls unaccetable since I am interested in shorting vega @stocks.
LDK would be a good example at the moment.
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I would be very careful with LDK. Very careful. Just when you think 100%+ implied volatility is high, it can easily zoom higher.

ALso, the underlying can EASILY jump 20 points in either direction. (I have been scalping the options here and there.)

Good luck.

AZD
 
Right, but what would be the most appropriate strategy with something like that, i.e the volatility bet.
I am very risk averse and my money management should take care of the losses should any arise. Again, interested in shorting vega directly, or indirectly if that possible as well
 
Quote from Sashe:

Right, but what would be the most appropriate strategy with something like that, i.e the volatility bet.
I am very risk averse and my money management should take care of the losses should any arise. Again, interested in shorting vega directly, or indirectly if that possible as well
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If you are very risk averse, fooling around with vega on something like LDK might not be the best thing. The IV is high for a reason.

But, with that said - and this is NOT a recommendation, you could do something like a put (or call) ratio spread - i. e. buy 1 45 put, sell 2 40 puts. Or go further out of the money.

Within the past week, I had a 1:2 ratio with the October 40 puts and 35 puts with the stock in the upper 40s. If it went to the moon, I lost nothing since the position was opened at approximately break even. If LDK closed at 35 on expiration day, we were talking big $$. Downside risk before loss was around 30.

When IV dropped somewhat, I closed the position out for a profit, but nowhere near what I could have made. I just felt uncomfortable with it, even with the cushion at $30. I mean, stocks can't fall 18 points can they? LOL Of course they can. In fact, LDK fell 8 points in less than 15 minutes yesterday.

Again, I am not recommending anything on LDK, just making an observation.

For further types of plays, IV Trader seems to have an excellent grasp as he has helped me out on another message board.

Good luck.

AZD
 
Tnanks AZD and rosy2, butterflies look more appealing to me, since straddles are more difficult to manage due to the overnight gap risk. Also there's always a chance to get some credit for long butterfly.
 
Quote from Sashe:

Are there any plays to short vega directly besides trading the reverse calendar spreads (long front month, short longer term calls)? direct shorting of the VIX or VIX calls unaccetable since I am interested in shorting vega @stocks.
LDK would be a good example at the moment.
More...
Straddle / short straddle?

As said be very careful, volatility can be very hard to "predict".
Why not just place directional trades?
 
Directional trades are easier to understand the risk profile and I was interested in something that would let me short the volatility directly ( like VIX with the indices) being as close as possible to delta neutral. Butterflies/Strangles are the choices that have come up here.
 
Quote from crgarcia:

Straddle / short straddle?

As said be very careful, volatility can be very hard to "predict".
Why not just place directional trades?
More...

you're saying directional trades are easier to predict??
 
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