Thoughts about my VIX trade

Quote from pandabear:

Why not do a calendar? As you are Long May20C's, go short 1/2 Jan 25C's ...

The problem is that VIX is at such a low point right now that you want to be writing calls when its higher ...
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Um, no. Let me say that again, No.
Never go long future months and short current month and think your are hedged. Each month in the VIX is a different futures contract and can act far differently than you would ever expect. Jan could double while May increases only marginally. If you don't understand this, then don't ever trade the VIX.
 
Ok, thanks for all the replies.. the trade was already made, and to the one who offered to open it at a higher vix level - well, it was opened at a higher level, since I took the trade earlier in the month, when the ensuing panic by the credit crisis was still very much at large. I prefer the 20-27.5 spread to the 20-25 spread, since I get more leeway to be wrong.

If the biggest argument against this trade is a large terrorist attack - then I'll stick to my guns. Even if that happens, it's become well known that market participants now just use those as buying opportunities to shoot the markets just to where they were before the news.. If it's not THAT massive, it's just tragic.. but doesn't effect the economy long term.. Anyway, it's still a theoretical risk, nonetheless..

I am covered completely and won't lose money in a 0 to 35 VIX level .. and I think that's a pretty good cover..

Will update as the year goes on.. Happy Holidays everyone!

:)
 
Quote from dberliner:



I am covered completely and won't lose money in a 0 to 35 VIX level .. and I think that's a pretty good cover..

:)
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Well gentleman, I think that says it all. You can't help someone who won’t be helped. It's like watching just the first half a Wall Street, or only reading about Vic before he blows out.

For anyone else thinking about trades such as this, I give you the Vix quotes from 1987:
10/1/1987 21.83
10/2/1987 21.42
10/5/1987 21.15
10/6/1987 24.28
10/7/1987 22.09
10/8/1987 23.52
10/9/1987 23.76
10/12/1987 24.59
10/13/1987 24.32
10/14/1987 26.36
10/15/1987 27.86
10/16/1987 36.37
10/19/1987 150.19

Yes, that is a gap from 36 to 150. Hey, I am only short 10, that would only be a $114,000 loss. Almost never and never are not the same.
 
opt789

Well said. It looks pretty obvious that he's not really interested in anything other then posting a trade that he put on in the past and has already moved his way.

I will say again, I am surprised his broker allows him to be naked short options.

Its not even a gap that huge that would smoke him. good luk trying to find a seller of those calls when they're in "fast market" and they dont have to honor the screens.
 
Wouldnt a better strategy be just to go long vix at 18ish, with March/April expiry. I cannot believe there will be limited volatility in the 1st quarter.
 
Quote from opt789:

Well gentleman, I think that says it all. You can't help someone who won’t be helped. It's like watching just the first half a Wall Street, or only reading about Vic before he blows out.

For anyone else thinking about trades such as this, I give you the Vix quotes from 1987:
10/1/1987 21.83
10/2/1987 21.42
10/5/1987 21.15
10/6/1987 24.28
10/7/1987 22.09
10/8/1987 23.52
10/9/1987 23.76
10/12/1987 24.59
10/13/1987 24.32
10/14/1987 26.36
10/15/1987 27.86
10/16/1987 36.37
10/19/1987 150.19

Yes, that is a gap from 36 to 150. Hey, I am only short 10, that would only be a $114,000 loss. Almost never and never are not the same.
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Would you be so kind and post where you got this information from? Did you compute that backtesting yourself considering the VIX was only introduced in 1993, and revised completely in 2003..

Also, if you wouldn't mind.. where was the VIX a month later? you neglected to post that...

Did you know that many of the participants of the aforementioned crash have said in interviews later on that if today's tools were at their disposal back then, with a much more computerized system and the internet age and more robust market efficiency, that sell off would probably have been much less severe?
 
Kids now days.
Yes the VIX is now computed differently, it is all in the CBOE's white paper. Obviously these numbers are the VXO which are the prior calculations using OEX options. Minor variations in calculations and OEX vs. SPX have nothing whatsoever to do with my point. Clearly you are far too ill-informed to see that.

As a former option market maker I know several traders who were on the floor in 87, and I know what they did and why they did it. You have shown you don't need any help, you already know everything. Can we close this thread now?
 
Quote from dipper17:

opt789

Well said. It looks pretty obvious that he's not really interested in anything other then posting a trade that he put on in the past and has already moved his way.

I will say again, I am surprised his broker allows him to be naked short options.

Its not even a gap that huge that would smoke him. good luk trying to find a seller of those calls when they're in "fast market" and they dont have to honor the screens.
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1) I'm not a "he".
2) What I'm not interested in is pure bashing.. telling me that there's a huge theoretical risk is not a new concept to me.. there's risk in the "risk-free" rate (not that I'm comparing).
3) The trade has not "gone my way" as of now. Apparently you're on an "auto-pilot" response to some hubris-filled traders.
4) You're a TOS user, right? check the margins yourself..
 
Quote from dberliner:

1) I'm not a "he".
2) What I'm not interested in is unfounded bashing.. telling me that there's theoretical risk is not something new to me.. there's risk in the "risk-free" rate (not that I'm comparing).
3) The trade has not "gone my way" as of now. Apparently you're on an "auto-pilot" response to some hubris-filled traders.
4) You're a TOS user, right? check the margins yourself..

Edit: Yeah, let's close the thread now. Everything that has been said could have been said in a different manner.
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1) My apologies for the gender mistake, I have traded with many fine female traders over the years and it was a honest mistake to assume you were male. No offense was meant.

2) I was not just tossing unfounded bashing, I made an observation based on your posts and perceived attitude.

3) I didn't bother to look up the current market in the trade nor do I know what exact prices it was actually executed.

4)I am not a TOS user, nor do I or have I ever done business in the retail environment or have knowledge of what retail margins would be. I expressed surprise that retail brokers allowed naked shorts in stuff like the VIX option.

As you may or may not know the VIX option is not an option on the VIX index. There are many nuances as to how the VIX future is priced and trades and how those options on the future are priced.

Good luck to you in the future.
 
Quote from dipper17:

1) My apologies for the gender mistake, I have traded with many fine female traders over the years and it was a honest mistake to assume you were male. No offense was meant.

2) I was not just tossing unfounded bashing, I made an observation based on your posts and perceived attitude.

3) I didn't bother to look up the current market in the trade nor do I know what exact prices it was actually executed.

4)I am not a TOS user, nor do I or have I ever done business in the retail environment or have knowledge of what retail margins would be. I expressed surprise that retail brokers allowed naked shorts in stuff like the VIX option.

As you may or may not know the VIX option is not an option on the VIX index. There are many nuances as to how the VIX future is priced and trades and how those options on the future are priced.

Good luck to you in the future.
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That's ok.. I was referring to opt789 regarding being a TOS user.
If your help is sincere then I appreciate it. I'm just so used to seeing so called "new" forum members coming aboard and posting their trades and always being dismissed unless they have already proven themselves, and I'm on these forums for 4 years+ .

I still intend to use a form of stop-loss on this trade if it will go from bad to worse.. a HUGE overnight gap to the downside in the markets that remains solvent will result in big losses, it's just not part of my outlook for the new year where I see big swings in both directions with volatility picking up but not to the hugest of extremes.

Cheers,

Dana Berliner
 
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