VIX ETF/Futures/Options Discussion Thread

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mahras2

Lets get a thread going discussing VIX/VIX-related product space. Vol of vol seems to be the best instrument to trade in this climate because there are some interesting dynamics playing out. The first is that correlations rising is great for volatility sensitivity meaning greater ups and downs and a faster time to mean reversion. Secondly, the curve shape is also a great thing to trade with the massive shifts between backwardation to contango we saw from the recent VIX spike.

I have been expressing my views on the VIX particularly with the XIV/VXX etfs. I have focused my thoughts on the front-end of the VIX curve and using the curve shape to dictate which product to long/short to put the roll behind my back.

At the moment I am long XIV from the 5.8-5.9 level having added chunks to my position as well as taking some money off the table at 7.5 level we hit 2 days ago.

What are you guys thinking in terms of the VIX products? Anyone have any interesting plays on?
 
Good thread, B.

Yeah, I would ring the register on that one. Maybe 8.25 if Feb comes in to 200/cash, but I don't see Feb trading 200 over cash for at least 10 days.

The tails of the curve are at 482bp (Sep-Feb), and/so there isn't enough juice for me to trade the switch.

I'm long Feb to 2500 in the 20/30 fly from 1.20 risk.
 
Ya I definitely think its time to get out for the short term. Made an absolute rookie mistake today, put my limit sell for the position at 7.69 and then ended up following that down all the way through 7.5. Closed half the position and kept the other half.

Any views on the jump in VIX? Seems abnormal compared to slight positive on SPX index and slight positive even on HY credit index (vix has been tracking that pretty well).

BTW, when you say 200 over cash, I am seeing that feb VIX is at 23.95 vs. spot at 22.20. Do you mean the Mar VIX which are at 25.55 now?
 
Another indicator I have been keeping an eye out on is the VIN/VIF ratio vs the VIX. Near term IV spiked today vs OTM IV today which definitely shows the reason for the move in VIX. Still don't see the reason for the near term options to see such a vol spike. Here is the chart I have been tracking:
 

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Quote from mahras2:

Ya I definitely think its time to get out for the short term. Made an absolute rookie mistake today, put my limit sell for the position at 7.69 and then ended up following that down all the way through 7.5. Closed half the position and kept the other half.

Any views on the jump in VIX? Seems abnormal compared to slight positive on SPX index and slight positive even on HY credit index (vix has been tracking that pretty well).

BTW, when you say 200 over cash, I am seeing that feb VIX is at 23.95 vs. spot at 22.20. Do you mean the Mar VIX which are at 25.55 now?
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Cash was 21.10 when I posted.
 
Quote from mahras2:

Still don't see the reason for the near term options to see such a vol spike.
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vvol spikes are usually followed by flattening of the vix curve. Happens alot around SP peaks. If you believe that to be the case, IMO the best risk adjusted flattener play is short the 30-60 day switch, long the 60-90 day i.e. long the 30-60-90 day fly in the futs 1:1.
 
Why are you watching vix cash at all? Not only can you not trade it, but the quoted vix cash methodology completely changes when the exchange determines the Vix expiring value. The biggest difference is that the Vix uses one spx expiry strip to determine expiration value, whereas they use 2 spx expiries when calculating the Vix "cash" value. Another MAJOR difference is that the vix cash uses market midpoint whereas the expiring vix print is almost always based on an opening rotation spx strip trade, which large vix futures holders use to move their vix futures risk into pure spx vol. Again, I don't know why anyone would attempt to track a value they can't ever trade.

Are you not capable of measuring each spx expiry's single strip vix implied price? It's quite easy w a computer and some data.

The actual vix didnt pop today, btw. The flawed and untradeable vix cash number went up-- which is simply a function of the calendar day Vix methodology vs the trading day (not exactly but moreso) of the spx options values. This phenomenon becomes more pronounced over a 3 day weekend.

Full disclosure: I am both a Vix options and futures market maker.
 
Quote from Jerkstore:
Why are you watching vix cash at all?
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It's sort-of kind-of the roll-to value, like the spot LIBOR for Eurodollar futures. I would not watch cash VIX the day before expiry, but if you calendar-adust spot vix and the futures, longer-term it's a good enough indicator of the roll down P&L.
 
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