Vix heading lower

DeltaSpread · Nov 15, 2006

Quote from 2006:

How come the DEC 11.00 Puts are only 0.35? Shouldn't they be at least .50 cents with vix this low?

The spread is actually correct .30/.35 and there was some healthy volume today. From what I can tell, like 85-90% of the trades were all hit on the ask, so new long put positions are banking on the VIX being 10.65 or lower next month.

But on the flip side, there was a bunch of calls purchased at various higher strikes.

Remember the pricing is different from equity derivatives, where there is parity and they "add up" so to speak in the case of an in the money put.

segv · Nov 15, 2006

Quote from DeltaSpread:

Or it sounds like you are in a purely whole position with more exposure if VIX continues this trend and only able to get out with an increase in volatility?

Not quite. Statistical volatility could equal or exceed implied in any number of the positions. Not to mention dispersion. At the moment not hedging with hard deltas, I'll move the premiums around. An increase in implied volatility would certainly be preferred to gamma trading through December.

-segv

2006 · Nov 15, 2006

Just seemed a little odd -- a few weeks back when VIX was low I sold NOV 11.00 Puts for 0.55.

Quote from DeltaSpread:

The spread is actually correct .30/.35 and there was some healthy volume today. From what I can tell, like 85-90% of the trades were all hit on the ask, so new long put positions are banking on the VIX being 10.65 or lower next month.

But on the flip side, there was a bunch of calls purchased at various higher strikes.

Remember the pricing is different from equity derivatives, where there is parity and they "add up" so to speak in the case of an in the money put.

DeltaSpread · Nov 15, 2006

Quote from 2006:

Just seemed a little odd -- a few weeks back when VIX was low I sold NOV 11.00 Puts for 0.55.

You are right. It definitely seems odd. When I saw it this morning also, it jumped out immediately at me.

They look really underpriced here, but I just dont feel comfortable banking on the VIX hanging at these lower levels for another near 5 weeks. Maybe thats why they are so cheap.

IV_Trader · Nov 15, 2006

Quote from segv:

Long Dec combos across much of the DJX. I was +disp but its almost insignificant after this session, all net +gamma +vega -theta. Long other series in various SPX and NDX issues. Its all well within risk constraints, but quite painful nonetheless these last sessions.

-segv

sucks , hope it will get better for you...BTW , most SPX's stocks vols holding steady so how come index vols are lower ? Is this due to skew beeing an almost non-exising ( hence , no weight affect on the mean ) ?

EdgeHunter · Nov 15, 2006

Quote from EqtTrdr:

VIX to zero!!!
I can't wait.... not too much longer before VIX gets sent a delisting notice from SEC$$$

Yes, and i always wait to go fully LONG just before it hits ZERO...

100% up to Go... no worries mate'

anybody know how i put a bug in the PPT boardroom... or date their wives...

cj...

__________________
HAVE STOP - WILL TRADE

segv · Nov 15, 2006

Quote from IV_Trader:

sucks , hope it will get better for you...BTW , most SPX's stocks vols holding steady so how come index vols are lower ? Is this due to skew beeing an almost non-exising ( hence , no weight affect on the mean ) ?

I think its supply. It has been very easy to buy. Also vols are certainly off in the constituents I own.

-segv

DeepFried · Nov 15, 2006

Quote from myminitrading:

I stand corrected, the low vix and the inverted yield curve should be cause for some caution IMO.

I agree. I think the inverted yield curve is too easily dismissed by the talking heads.

I'd like to see the VIX get into the 9's.

It would make for an even better put buy when the market eventually turns.