VIX ETF/Futures/Options Discussion Thread

for any of you guys new to this april futures are 7.13 premium to spot and it will converge even with a spot vix spike to 18-19 if you hang in there. through options i'd pick short april calls, long may if you wanted to play it. there is a demand right now for april due to the etn's etc so i'm sure there's time too..and there's never a sure thing..but that one is good.
 
Quote from sellindexvol66:

for any of you guys new to this april futures are 7.13 premium to spot and it will converge even with a spot vix spike to 18-19 if you hang in there. through options i'd pick short april calls, long may if you wanted to play it. there is a demand right now for april due to the etn's etc so i'm sure there's time too..and there's never a sure thing..but that one is good.
More...

The options play is simply incrementally long the switch.
 
Quote from sellindexvol66:

i know, lol

i'm not even in that but i'd hate to get a guy trying these in futures as a starting point.
More...

Yeah, it's really awesome of you to hand these mooks 600bp in edge to expiration. Nice. F*cking diarrhea mouth.
 
Quote from trefoil:

Can't speak for atticus of course, but I thought the proposed structure was brilliant because it's practically like buying a straddle/strangle, if the SPY and VIX act anything like they have historically.
More...

Depends on the ratio of spx delta to the vix. That's always a tricky thing and hard to guage. They will definitely hedge, but to what extent is almost completely unkown except it will be something greater than zero.
 
Not expecting perfection. When I thought about it, I figured the logic here was that to get back to 23 - which spot has only had one or two brushes with since the year started - would take a sharp decline in the indices. I understand that VIX can fluctuate around in a manner uncorrelated with the indices within a certain range, but by now we're looking at a 50% + spike, and I can't see that happening without a nice decline in SPX, and of course SPY.
 
Quote from trefoil:

Not expecting perfection. When I thought about it, I figured the logic here was that to get back to 23 - which spot has only had one or two brushes with since the year started - would take a sharp decline in the indices. I understand that VIX can fluctuate around in a manner uncorrelated with the indices within a certain range, but by now we're looking at a 50% + spike, and I can't see that happening without a nice decline in SPX, and of course SPY.
More...

Yeah. So the SPY declines 10%, where will the VIX be then? Probably 30+ and implieds on the VIX gone through the roof. So your call will be worth a lot more than $7. How much SPY put do you need to buy for that? And then how does that hedge work if the SPX sells off only 5%? And how well does that work if the SPX rallies 3%?

It's a linear hedge against a convex risk. Very difficult to manage - at least in my experience.
 
Quote from trefoil:

FYI, I did this but modified it somewhat.
Sold 6 23/28 call spreads on April for the VIX, and bought 2 139/129 put spreads on the SPY. I didn't sell outright 'cuz of the crazed margin I'd have to put up, and I did 23 because it was close to ATM at the time, and I always like to sell/buy at right around ATM if I can manage it these days.
More...

I used to do something similar on a monthly basis for years and it works very nicely though you might wanna go a little farther out on your gamma hedge. If you know how to properly model the var exposure you can easily hedge with cheap otm gamma, provided you don't go unbound on risk. Also, given that the current term structure is more of an outlier than the norm it is not a perfect data point for an experiment unless you weigh it.
 
You must log in or register to reply here.
Back
Top