VIX ETF/Futures/Options Discussion Thread

babutime · Apr 16, 2012

Quote from sellindexvol66:

babubooeye, you are correct in what you can do. i contend most should not. i am also not interested in saying how i do it in any case.

Interesting..

...I wonder why you asked me in the first place then... Since I clearly had no answer...

sellindexvol66 · Apr 16, 2012

Quote from babutime:

Interesting..

...I wonder why you asked me in the first place then... Since I clearly had no answer...

Quote from sellindexvol66:

so once you score the FV of a vix future; what can you do with that? lol

note the "lol"

omg, my point is/was that you "clearly had no answer" (just as 99.9% of traders have no clue in vix stuff) and that was not picking on you. even messing in options without knowing the nuances you will get killed. i am just trying to save some of you guys some money, that's all.

babutime · Apr 16, 2012

Quote from sellindexvol66:

Quote from sellindexvol66:

so once you score the FV of a vix future; what can you do with that? lol

note the "lol"

omg, my point is/was that you "clearly had no answer" (just as 99.9% of traders have no clue in vix stuff) and that was not picking on you. even messing in options without knowing the nuances you will get killed. i am just trying to save some of you guys some money, that's all.

I was being sarcastic. I got your point. Shuda included a "lol" myself hahaha

Jgills · Apr 16, 2012

do you know where I can get historical intraday data for VIX? (besides bloomberg)

If you don't mind answering, is anyone using OptionsXpress? if so, what platform are you using to trade and monitor greeks, are you able to pull any streaming data into excel?

sorry if i seem a little behind, i'm used to having these things spoonfed (i.e. bloomberg, technology team, etc, and i'm not used to trying to get this data in a cost efficient manner on my own)

thanks

Jgills · Apr 19, 2012

Nevermind. i've got it.

Jgills · Apr 28, 2012

now if you were putting butterflies on in vix futures, say

long 1st month, short 2nd
short 2nd, long 3rd.

would you expect to be paying 4 separate nickle-wide spreads? if not, how would you go about putting this trade on to avoid 4 nickle spreads? what broker do you use?

I'm running some back tests and need to incorporate transaction costs. (clearly i haven't done much trading in this space, but no need to attack me about it, i understand how the products work)

trefoil · Apr 28, 2012

Quote from Jgills:

now if you were putting butterflies on in vix futures, say

long 1st month, short 2nd
short 2nd, long 3rd.

would you expect to be paying 4 separate nickle-wide spreads? if not, how would you go about putting this trade on to avoid 4 nickle spreads? what broker do you use?

I'm running some back tests and need to incorporate transaction costs. (clearly i haven't done much trading in this space, but no need to attack me about it, i understand how the products work)

I'd always do spreads, but I'm new to the VIX too, as you'll see if you go back a few pages. I'm still trying to see how to attack the thing also, and still also trying to figure out if it's even worth it. Sort of got sucked in by temptation.
Getting back, anything other than spreads would be suicidal, I would think. Also it would incur very large margin costs, since as you go between months you're actually going against different futures contracts, so it's not the same as a fly on SPY (I rhyme!), for instance.
The transaction costs are pretty much unavoidable. I use TOS, I think most here would use either them or IB.

No Option · Apr 29, 2012

You can spread them using IB.

Two spread trades to enter a butterfly and two spreads to exit.

IB doesn't do more than 2 legs on futues.

Quote from Jgills:

now if you were putting butterflies on in vix futures, say

long 1st month, short 2nd
short 2nd, long 3rd.

would you expect to be paying 4 separate nickle-wide spreads? if not, how would you go about putting this trade on to avoid 4 nickle spreads? what broker do you use?

I'm running some back tests and need to incorporate transaction costs. (clearly i haven't done much trading in this space, but no need to attack me about it, i understand how the products work)

Mattycakes · Jun 2, 2012

Quote from sle:

(c) what is the exact definition of the vix futures and why a vix futures contract is NOT a forward variance swap

Hi sle,

Can you explain this, or help point me in the right direction? I know there should be a convexity adjustment related to the variance of the Vix futures itself (http://cfe.cboe.com/education/vixprimer/Features.aspx), but intuitively, I don't see where this is coming from. If t1 future is trading rich so I sell and buy the t1-t2 fwd varswap, then at futures expiry sell t2 option strip against my long t2 varswap and use proceeds to settle short futures position, am I not hedged?
I imagine discrepancy is coming from E[VIX] <= sqrt(E[VIX^2]), but admit I don't fully see how this enters into the vix vs fwd var 'arb'. Is it that the convexity in the PL on my short t1 varswap is incorrect to have properly matched the payoff?

Thanks

sle · Jun 2, 2012

Quote from Mattycakes:
convexity adjustment related to the variance of the Vix futures

Convexity comes from the fact that vix futures settle linearly, while variance swap P&L will be quadratic. E.g. if you have put on vix futures vs forward var in one unit of vega and it is vix futures expiration date (assume that on settlement VIX is the same as fair var and that original execution var strike was equal to vix futures):

var p&l = (vix^2 - k^2)/(2*k)

vix p&l = (vix - k)

clearly, they are not equal and there is convexity - if long var, your p&l is quadratic, while for vix your p&l is linear.