I like trading vix products, but I do not understand some of them. Can anyone tell me how these vix structured products work or refer me to a website that explains them. In interactive brokers if you type vix into the quote field, there is an option to see structured products. It is these I would like more info on. I see they have a website with quotes and a little info, but nothing that really explains them. https://www.euronext.com/en/products/warrants-certificates/NL0012103634-XAMS
vix structured products - need help
- Thread starter robert111
- Start date
Yeah... trading VIX without understanding it is going to be an issue at one stage.
Looks like that link is about VIX warrants. Warrants are similar to options, but they are created by issuers like banks in stead of by the exchange (like options). They probably trade not much, and therefore are less liquid. Also, likely they are biased in a certain way, since the issuer will always be the opposite side of the trade... and sometimes you can only buy then and not sell... so possibly/likely biased upwards, meaning you would pay too much in premium compared to the regular options.
So, first thing you should do... is learn all about VIX and VIX futures/curve... then the options.
And keep in mind that VIX options are basically a derivative of a derivative of a derivative of a derivative of a basket of stocks... (yep, you read that correct).
VIX options are derived from the underlying VIX future, which is derived from the S&P options implied vols, which are derived from the S&P futures, which is a derivative of the S&P spot index, which is a basket of stocks.
Looks like that link is about VIX warrants. Warrants are similar to options, but they are created by issuers like banks in stead of by the exchange (like options). They probably trade not much, and therefore are less liquid. Also, likely they are biased in a certain way, since the issuer will always be the opposite side of the trade... and sometimes you can only buy then and not sell... so possibly/likely biased upwards, meaning you would pay too much in premium compared to the regular options.
So, first thing you should do... is learn all about VIX and VIX futures/curve... then the options.
And keep in mind that VIX options are basically a derivative of a derivative of a derivative of a derivative of a basket of stocks... (yep, you read that correct).
VIX options are derived from the underlying VIX future, which is derived from the S&P options implied vols, which are derived from the S&P futures, which is a derivative of the S&P spot index, which is a basket of stocks.
Interesting. Not sure its liquidity.
This seems to be a quanto KO barrier. You can google "quanto" and "Knock-Out Barrier" to understand its payoff. The pricing/hedging is non-trivial and model-dependent.
I would recommend this website: https://sixfigureinvesting.com/2010...ce=SFI&utm_medium=sidebar&utm_content=LongVIX
This website has a wealth of articles that explain a whole sleuth of VIX-tracking products in detail complete with their prospectuses.
Good luck!
This one is issued by bnp paribas markets. if you go to their dutch site and use google translate you should get the info you want.
https://www.bnpparibasmarkets.nl/Showpage.aspx?pageID=4&intptype=67&intunderlying=461585
https://www.bnpparibasmarkets.nl/Showpage.aspx?pageID=4&intptype=67&intunderlying=461585
Right... it's a short turbo... which is basically a leveraged short VIX future with an automatic stop attached... I'll look into it in a bit...
https://www.bnpparibasmarkets.nl/Indices/VIX-Future/Turbo-Short/NL0012103634
Okay, so it works like this:
The price of the turbo depends on the relevant VIX future (sept in this case) and the 'financieringsniveau' (financing level) of the turbo.
VIX sept is 15.18 (Ref.) and finance level is 23.21. So difference is 8.03 USD, which is 6.86 EUR. Stoploss is at 20.89 for the VIX future... at which case you still get 2.32 USD (1.98 EUR) for the turbo.
If VIX sept drops to say 12... the value is 23.21-12= 11.21 USD (9.58 EUR).
The 'hefboom' (leverage ratio) is 1.93... which is price of the VIX Future/turbo... in this case, 15.18 / 7.95 USD (6.80 EUR) = 1.91
They both move 1:1 .... 1 point in VIX is about 1 USD in the turbo (0.85 Euro).
You're paying 2% financing cost... which is incorporated by (daily?) lowering the Financing level... (or so I think it is, if I remember correctly).
It's rolled-over every month I think, adjusted to the next VIX future...
So there it is.... it's a leverage VIX future short, with a stoploss at 20.89
BNP Paribas makes money on the fact that it's priced slightly rich (about 1.5%) and with the 2% financing they charge... which is ridiculous, since VIX futures are daily settled and you're paying all upfront with the turbo... so in effect they are receiving net cash... and charging you for it
(PS. no, you can't short the turbo itself to arb it)
Okay, so it works like this:
The price of the turbo depends on the relevant VIX future (sept in this case) and the 'financieringsniveau' (financing level) of the turbo.
VIX sept is 15.18 (Ref.) and finance level is 23.21. So difference is 8.03 USD, which is 6.86 EUR. Stoploss is at 20.89 for the VIX future... at which case you still get 2.32 USD (1.98 EUR) for the turbo.
If VIX sept drops to say 12... the value is 23.21-12= 11.21 USD (9.58 EUR).
The 'hefboom' (leverage ratio) is 1.93... which is price of the VIX Future/turbo... in this case, 15.18 / 7.95 USD (6.80 EUR) = 1.91
They both move 1:1 .... 1 point in VIX is about 1 USD in the turbo (0.85 Euro).
You're paying 2% financing cost... which is incorporated by (daily?) lowering the Financing level... (or so I think it is, if I remember correctly).
It's rolled-over every month I think, adjusted to the next VIX future...
So there it is.... it's a leverage VIX future short, with a stoploss at 20.89
BNP Paribas makes money on the fact that it's priced slightly rich (about 1.5%) and with the 2% financing they charge... which is ridiculous, since VIX futures are daily settled and you're paying all upfront with the turbo... so in effect they are receiving net cash... and charging you for it
(PS. no, you can't short the turbo itself to arb it)
