VIX-Trading. What is the best way to make money?

Decay is meaningless in the vix ops. You should be looking at the vix term structure or the vol of vol. If i understand your style correctly you are betting on index vols not decay. Which is essentially a long/short index bet. Might as well sell/buy vol outright then mess with the vix ops.

If its positive theta you are after you should be long the convergence via long calendars/diagonals. Good luck.
 
Thank you sellvol!

What I am doing is very similar to selling a straddle on SPX.

The only difference is that the VIX can't go to zero nor it can go to infinity.

That mean reverting makes the unique value for the VIX options.
In addition: Where do you have 70+ volatility on an instrument.

Today for a moment I thougt focussing solely on that market. It's the crown market, the most sophistic market around.

What do you think?
 
Quote from gg12:

What I am doing is very similar to selling a straddle on SPX.

The only difference is that the VIX can't go to zero nor it can go to infinity.

What do you think?
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Great!
It cant go below 10 or 9.... it can go to 16, 20 or 40 sometime to 70...
It is like a superb safety.
Keep going!
 
Quote from gg12:

Attached my analysis for the VIX calls.

For me the Call July 16 looks attractive to be sold with a stop in place.

C 16/7 1.35
possible stop loss 2.50 (depending on individual setting)

Example for selling 1 contract:

Get $135 by selling (before commission)
Pay $250 (if no slippage, gaps, etc.)

Loss $115 (min. after stopped out)
Win if VIX stays below 16 at expiration and stop loss is not hit is $135 (minus commission).

For taking no more than 2% risk per position on your account size your account size should be $5.750.
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gg12,
Do you understand the extreme risk you are taking by selling naked calls on the VIX? I realize it is unlikely, but the risk is there nonetheless. Your stop order is completely meaningless if something like 9-11 happens and the market gaps down. If you are naked short the 16 calls and the VIX gaps to 50, like is has before, then you will lose $3400 per contract. If you sell it for 1.35 every month then if you have one serious event in 25 months you will end up down money overall.
 
Quote from opt789:

gg12,
Do you understand the extreme risk you are taking by selling naked calls on the VIX? I realize it is unlikely, but the risk is there nonetheless. Your stop order is completely meaningless if something like 9-11 happens and the market gaps down. If you are naked short the 16 calls and the VIX gaps to 50, like is has before, then you will lose $3400 per contract. If you sell it for 1.35 every month then if you have one serious event in 25 months you will end up down money overall.
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You are right Opt.

It's more safe to sell put when the VIB [VIX on VX] is very low.
 
opt789,

You are right with your warning about selling naked calls (or puts) and it's no longer possible to make money management. A panic can destroy the account and even swap out into other assets.

"Worst" case (based on 13 years historical data of the VXO) there would be a peak to, say, of 60 - 70 points. But it could be also a peak to 100+ points. That's a huge risk and one can tend to ignore it, since we saw only max. 20 point extremes in the short past.

That's the reason why I am doing only a few contracts.

To deal with big gaps I could buy higher strike calls to protect my downside.
 
Quote from gg12:



To deal with big gaps I could buy higher strike calls to protect my downside.
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GG
Yes , You will be able to buy five or six of highest strike / And to sell ONLY three against them.

REMEMBER: Variation of highest - Will be weaker than bottoms.
Be care with the slippage, and the difference of delta.

May it would be needed to trade actively the bottom of the leg.
To offset the price of higher calls.
To keep constantly the higher SAME MONTH calls in guarantee into the account.

And to close all, six days before expiry. At the best price, Each leg separately. They are not naked any more. It is reassuring. Which will be the cost? That can be very pretty and gaining

Your maximum loss would be the difference of strike more slippage.

Which are currently volumes of these derived products?

http://finance.yahoo.com/q/bc?s=^VIX&t=my&l=off&z=l&q=c&c= [During ten years, the variation was between twenty and forty - 20/40 !] - http://finance.yahoo.com/q/hp?s=^VIX&a=00&b=2&c=1980&d=04&e=20&f=2007&g=m -

Thank you to make any comment!
 
Thank you artes!

I've made some analysis about the VIX over the last 3 years (see attached graphics).

--------------------------------------------------------------------------------
VIX 3 years 2 point grid

I found a system which I call VIX2_3x3

VIX
2 point grid (=1 unit)
Scalp 3 units
x apply your personal money management stop
3 Trailing limit to cash in profit
 

Attachments

Quote from gg12:

Thank you artes!

I've made some analysis about the VIX over the last 3 years (see attached graphics).
More...

The VX future is not a spot of VIX index.

The VX future is an expected value of the "¨VIX" calculation based one day after future expiration, the 16th of each month.

The VIX can move and the VX future not. Or reverse.

Each month of VX future will be very different in value at the same time.

LIFE IB Webinars: http://www.interactivebrokers.com/en/general/education/webinars.php?ib_entity=llc

RECORDED IB Webinars : http://www.interactivebrokers.com/en/general/education/priorWebinars.php?ib_entity=llc

- Recorded event: CFE - Trade Market Volatility with VIX Futures -

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