VIX ETF/Futures/Options Discussion Thread
- Thread starter mahras2
- Start date
I stand corrected.
Also, you are right about a few things: 1) my suggestion helps less and less as the trader becomes more experienced-- and more capable of determining value edge, and 2) I had no idea that you, as well as a few others in this thread actually make a living trading vix futures -- if you are smart enough to have made consistent money trading term structures, then my excution for dummies suggestion certainly wont help you.
Is your ego restored?
Let's get back to discussing the vix. Anyone ever measure VWB and VWA from tuesday night compared to the HOSS overflow file and the vix print? I have started, and the results are interesting. This morning for instance, the closing value was 23.64, with VWA trading around 23.5 ish last night, and a "need more sellers" overflow file in the HOSS this morning.
Also, you are right about a few things: 1) my suggestion helps less and less as the trader becomes more experienced-- and more capable of determining value edge, and 2) I had no idea that you, as well as a few others in this thread actually make a living trading vix futures -- if you are smart enough to have made consistent money trading term structures, then my excution for dummies suggestion certainly wont help you.
Is your ego restored?
Let's get back to discussing the vix. Anyone ever measure VWB and VWA from tuesday night compared to the HOSS overflow file and the vix print? I have started, and the results are interesting. This morning for instance, the closing value was 23.64, with VWA trading around 23.5 ish last night, and a "need more sellers" overflow file in the HOSS this morning.
what may seem easy to you may not be for others as i have personally seen my share of guys blowing up playing the vol curve. i would suggest those who want to test it, watch it before you play it.
Isn't that always true? Anyway, I am not trying to sell anything here, so the word "easy" is relative, similar to "it's easy to run a marathon, just train for a year and suffer a lot". Here some thoughts, if someone wants to get involved in this sort of stuff:
(1) Historical data. You can get a full history of the VIX futures from Bloomberg. I, personally, have also generated synthetic "futures" from variance swap prices since the beginning of S&P options data (convexity adjustment can be imputed from S&P ATMish volaitlity and volcor). It's a lot of work, but if you gonna look at VIX futures TS in detail, it's worth the effort.
(2) Obviously, look at business day vol, both the futures and the cash VIX. Cash would be especially sensitive to this bit.
(3) Some people like to store futures in costant term format (e.g. 30d, 60d etc), but I found that it's better to store futures in the original form (including the cash VIX) and re-interpolate for the given set of maturities
(4) My preference in VIX is to play risk-neutral spreads (actually, in general I preferr beta-neutral trades, I am a p**** like that). I've found that the best way to find these weights is simple linear regression, even though Barcap research people swear by PCA weights.
(5) Pay attention to rolldown - even a very dislocated spread/fly can lose you money if it bleeds like crazy
(1) Historical data. You can get a full history of the VIX futures from Bloomberg. I, personally, have also generated synthetic "futures" from variance swap prices since the beginning of S&P options data (convexity adjustment can be imputed from S&P ATMish volaitlity and volcor). It's a lot of work, but if you gonna look at VIX futures TS in detail, it's worth the effort.
(2) Obviously, look at business day vol, both the futures and the cash VIX. Cash would be especially sensitive to this bit.
(3) Some people like to store futures in costant term format (e.g. 30d, 60d etc), but I found that it's better to store futures in the original form (including the cash VIX) and re-interpolate for the given set of maturities
(4) My preference in VIX is to play risk-neutral spreads (actually, in general I preferr beta-neutral trades, I am a p**** like that). I've found that the best way to find these weights is simple linear regression, even though Barcap research people swear by PCA weights.
(5) Pay attention to rolldown - even a very dislocated spread/fly can lose you money if it bleeds like crazy
Playing the term structure can be risky if you're trading options. But VIX seems much safer to me for a few reasons:
One, you aren't dealing with a potential liquidity trap - even the back month futures are usually no more than .20 wide. In vol terms, VIX trades tighter than options do so it's always easier to cut your losses.
Two, VIX futures only go out 8 months or so. The behavior between, say, the 3rd future and the 8th will be more or less the same. You could put that spread on (maybe ratio it just slightly) and sleep easy at night. But hedging 2yr vega with 3mth vega is a recipe for disaster.
curious how you model the rolldown. Do you just keep the term structure fixed in terms of constant maturities but move the day forward and reprice? I've actually tried using the variance swaps theta to come up with an estimate, but I'm not convinced this is the best approach. Thinking of the theta of a future is just not intuitive for me.
i can see why you choose your handle. clearly you have traded vix products extensively, lol. (trying to figure out if you pulled this shit out of your ass or really mean it)
These are very different trades that look at very different risks - if you are selling the front VIX vs back VIX, you are an outiright seller of risk (unless you do some risk-neutral ratio). If you are trading gamma vs vega (root time vega flat), you can't say right away if you are a seller or a buyer of risk.