VIX fly / spread journal

[cdcaveman]

Quote from trefoil:

Yeah, I buy 1st & 2nd months, then start shorting from 3rd on. Suffered when the curve was steepening a couple weeks back, with front declining while back was rising, but all better now. I'm realizing more and more I have to watch the VXV/VIX ratio to get a good handle on when to do this and when not, or at least when to be heavily in it and when not.
Like I said before, 3rd month seems to be the charm, at least for me. Mostly I short the 3rd, do a little after that.

It works untill it doesn't.. Have you seen what your book will look like going through a 2008 or even 2011? were you trading then

 

[trefoil]

Quote from cdcaveman:

It works untill it doesn't.. Have you seen what your book will look like going through a 2008 or even 2011? were you trading then

Not this way. My logic, such as it is, is that the front moves more, so it's a decent hedge. Did a ton of empirical research, and what emerged is that, for whatever reason (actually I think I have the reason down, but that's another story entirely), the third month provides a reasonably steady return. Front month is exponentially more volatile, so I figured that'll do as the hedge. Actual experience has varied some from that logic and the proportions of buying & selling I was using, as I noted, so I have to do more work on the right proportions under differing conditions. It has been reasonably good to me so far though. Up this week despite the rise in the VIX, for instance, so that's something.

 

[cdcaveman]

Quote from trefoil:

Not this way. My logic, such as it is, is that the front moves more, so it's a decent hedge. Did a ton of empirical research, and what emerged is that, for whatever reason (actually I think I have the reason down, but that's another story entirely), the third month provides a reasonably steady return. Front month is exponentially more volatile, so I figured that'll do as the hedge. Actual experience has varied some from that logic and the proportions of buying & selling I was using, as I noted, so I have to do more work on the right proportions under differing conditions. It has been reasonably good to me so far though. Up this week despite the rise in the VIX, for instance, so that's something.

Well that's good.. any research is better then no research... I in the past always shot from the hip, and did all the quantitative studies after i lost money..

 

[sellindexvol66]

Quote from trefoil:

Not this way. My logic, such as it is, is that the front moves more, so it's a decent hedge. Did a ton of empirical research, and what emerged is that, for whatever reason (actually I think I have the reason down, but that's another story entirely), the third month provides a reasonably steady return. Front month is exponentially more volatile, so I figured that'll do as the hedge. Actual experience has varied some from that logic and the proportions of buying & selling I was using, as I noted, so I have to do more work on the right proportions under differing conditions. It has been reasonably good to me so far though. Up this week despite the rise in the VIX, for instance, so that's something.

yes, if u have a book of long and short vol thats great..of course its an art to make it earn overall. good luck.

 

[trefoil]

Quote from sellindexvol66:

yes, if u have a book of long and short vol thats great..of course its an art to make it earn overall. good luck.

Thanks!

 

[Jgills]

Quote from Jgills:

i took the jan/feb leg off at 91.

the front fly had dropped all the way to -25c and then started to catch a bid back up, this was shortly after the front spread got a strong bid at 68 and swiftly went back up to 80 (which one of u was it?).

i did get to see my fly trade at 19, which is where it was when i existed the front leg of it, at this point i think we can see the curve widen back out a bit so i will potentially maintain this position of short feb / long mar in the short-term.

my only concern is NFP coming up may keep a bid there and not allow the feb/mar to widen back out. personally i think it can see 80 before nfp, what do you guys think?

given that all spreads had continued lower except the jan/feb.. i added a jan/feb back on at 95 earlier this am.

 

[NKVI>NH]

Quote from NKVI>NH:

hi i am new here and ssee this thread is a vol thread.

i trade vol in asia.

currently i am in a calendar spread short january long february @ .25 cents

spot is 22.96

i am also in long dec short jan @ 3.10

timed exit is dec expiration on both trades.

i can answer questions also; i know this stuff is far from intuitive; although i will not spill excessive edge i can offer the "why"

update: short spread dec jan is 2.95

long spread jan feb is -1.25

this means the fly is 4.2 points apart.

now for the correction to original post pricing:

i quoted jan feb as ".25" on the trade start> it was really "-.25"

so original fly price was 3.35 "apart"

i am down marked on the fly by .85 cents

have not added. will update at end of next week. the move in jan futures i did not expect; although i expect the fly to flatten by expiration.

 

[Jgills]

i sold dec/jan spread here (long dec, short jan)

i think with spot >= dec and little time to maturity + fomc on the horizon it has potential to earn some over the next week. i also am short vol elsewhere on the curve

 

[cdcaveman]

Quote from Jgills:

i sold dec/jan spread here (long dec, short jan)

i think with spot >= dec and little time to maturity + fomc on the horizon it has potential to earn some over the next week. i also am short vol elsewhere on the curve

isn't the fomc meeting dec 17-19.. isn't that after dec expiration?

 

[Jgills]

Quote from cdcaveman:

isn't the fomc meeting dec 17-19.. isn't that after dec expiration?

minutes are out dec 18, day of expiry. the thesis is front end of vols will maintain a bid ahead of the announcement. im not going to hold it through expiry, i'll close it prior to.