VIX Futures Trading

S

Straitjacket

This is my trading journal for VIX Futures. I will post real trades in real time (small size).

Looking for any guidance or helpful critique.

I am willing to absorb considerable variance if the trade has edge and good R/R.
 
Bought 5 x JUL/AUG calendar spread (-JUL + AUG) for 0.02$.

I am expecting the spread to widen in my favor if the term structure steepens over the next week or so.
 
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Straitjacket said:
Bought 5 x JUL/AUG calendar spread (-JUL + AUG) for 0.02$.

I am expecting the spread to widen in my favor if the term structure steepens over the next week or so.
More...

Why? Coronavirus is priced in unless it goes pandemic and the term structure is showing far more weight towards election season. What are you anticipating in summer that could cause the JUL to fall and AUG to rise?
 
gaussian said:
Why? Coronavirus is priced in unless it goes pandemic and the term structure is showing far more weight towards election season. What are you anticipating in summer that could cause the JUL to fall and AUG to rise?
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no.
 
gaussian said:
Why? Coronavirus is priced in unless it goes pandemic and the term structure is showing far more weight towards election season. What are you anticipating in summer that could cause the JUL to fall and AUG to rise?
More...

I'm not anticipating any events in the summer. I don't have a view that far in the future.

My rationale for the trade is that there is more of a possibility for the spread to widen in my favour than not given that the recent week has narrowed the spread to almost zero.

My best guess about what I am doing is trading mean reversion of the Term Structure Slope. I admittedly am not very knowledgeable.
 
Straitjacket said:
I'm not anticipating any events in the summer. I don't have a view that far in the future.

My rationale for the trade is that there is more of a possibility for the spread to widen in my favour than not given that the recent week has narrowed the spread to almost zero.
More...

Out of curiosity, if there is no particular view with regards to the calendar then why JUL/AUG as opposed to JUN/JUL or AUG/SEP? Other than the fact that it's the cheapest spread in the back of the curve.
 
rallymode said:
Out of curiosity, if there is no particular view with regards to the calendar then why JUL/AUG as opposed to JUN/JUL or AUG/SEP? Other than the fact that it's the cheapest spread in the back of the curve.
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Rally, didn’t expect you to chime in so really happy you responded.

I have to admit that cheapness of the spread is part of it.

I felt that there was little advantage to going AUG/SEP given it was more expensive and so inferior to JUL/AUG if curve kept flattening.

The nearer switches worry me because I couldn't hold for very long (in case of prolonged flattening) without the margin increasing. I want to hold until profit or until few days before calendar becomes M3-M4 so it concerns me.

I might be kidding myself but that switch looked like good R/R to me.
 
Straitjacket said:
Rally, didn’t expect you to chime in so really happy you responded.

I have to admit that cheapness of the spread is part of it.

I felt that there was little advantage to going AUG/SEP given it was more expensive and so inferior to JUL/AUG if curve kept flattening.

The nearer switches worry me because I couldn't hold for very long (in case of prolonged flattening) without the margin increasing. I want to hold until profit or until few days before calendar becomes M3-M4 so it concerns me.

I might be kidding myself but that switch looked like good R/R to me.
More...

Price in absolute terms means very little when it comes to spreads. In the absence of some edge related to the calendar or shifts in the shape of the curve I would rather sell vol outright.

My advice would be to stay away from spreads until you find some term structure alpha and can recognize and pick off dislocations.
 
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