VIX/VXX/VX Trading Journal

Consider the amount of exposure these complacent bulls have acquired over the past few years as well. This market has never struck me as being full of long and strong until the end types, more-so traders riding the wave until the wave stops.

I shoulda kept that VX spread open - but no way I could have known we'd see a real market for 2 days in a row.

Edit: original close at 0.23, it's now at -0.89! Sheesh.
 
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SPX options should stay bid up with the panic now setting in so VIX will stay up here unless we get some reprieve. The real question is how far Sep VX will go meet VIX at these levels or will stay at a discount expecting a vol pullback. I am looking at some spreads using VIX options with lower risk to play a pullback or less steepening of SEP/OCT
 
newwurldmn said:
I don't think there is real panic in the vol markets just yet.
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The VIX is at 28 though based on the SPX options with VX at 19.90 front month, quite a discount. I wonder if the large funds rushing to hedge their portfolios have pushed IVs up at an extreme level but VX traders still keeping it somewhat tempered. The IV of SPX options viz a viz VX is the slight panic I am referring too.
 
It could be an artifact that the market doesn't believe this will persist. VIX represents roughly September vol and Sep VIX futures representing Sep-Oct forward vol.
 
TRADE-

At the close entered a calendar with SEP/OCT but replicated using the VIX options instead to reduce the risk significantly in most situations:

LONG SEP 30 VIX Puts @ 11.90 (equivalent of Short Sep VX @ 18.10)
LONG OCT 14 VIX Calls @ 4.90 (equivalent of Long Oct VX @ 18.90)
Same as VX -Sep/+Oct Calendar but @ +.80.

To be short SEP VX too risky for my blood in a -SEP/+OCT spread. If vols come down then the SEP VX will fall further than the OCT VX and the SEP VIX Put will increase more than the OCT Call will lose (calls hold value better 1 month out since always future expectation of vols rising).

If we get a huge spike in SEP vols, lets assume well above 30 like we had in the past scenario, Sep Puts go to almost nothing and OCT Calls will really jump. Even if vols go to 60 on death spiral lower, the position will make money.

Risk is if OCT falls as sharp as SEP just in regular VX calendar and I lose on both options. For the most part looking for SEP put gain to offset OCT Call loss. Risk is there but more controlled. There is potential for loss.

Downside to this is due to time value premium it is done for net debit but that is the trade off for reducing some of the risk exposure. This will allow me to hold this hopefully to SEPT expiration if we have a return in the curve to normal.

EDIT: To be clear, a trade like this has to be held longer to really get some movement for profit, a one day play might not work unless VX really drops like it rose today. The better controlled risk will let me hold this longer.
 
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VIXFactor said:
The VIX is at 28 though based on the SPX options with VX at 19.90 front month, quite a discount. I wonder if the large funds rushing to hedge their portfolios have pushed IVs up at an extreme level but VX traders still keeping it somewhat tempered. The IV of SPX options viz a viz VX is the slight panic I am referring too.
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newwurldmn said:
It could be an artifact that the market doesn't believe this will persist. VIX represents roughly September vol and Sep VIX futures representing Sep-Oct forward vol.
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Agreed. I also tend to feel that we will have some more vol (VIX) spiking but the futures will stay at a somewhat discount to VIX. My only fear is VIX keeps running and the VX rides higher based on expectation that OCT/NOV will be worse. Not my current viewpoint though. But in general my feeling is for this vol to persist into the fed decision and any fall out but some up and down chop after that to bring some of these down to earth. These are two long and strong down days so we will see next week (market has short memory).

I am just holding my NOV/DEC/JAN VX FLY, NOV/SEP VIX 21 Calendar and the trade I posted above. /Es took out months of lows and OCT 2014 lows are in sight where VX hit 24. I hope if it does get there it does so in a grind with some pullbacks to allow some action :).
 
SEP/NOV Calendar has gone backwards. I usually am very quick to cut losses being kind of hesitant to let positions run but going to let this position hold to see what happens today.

NOV/DEC/JAN Fly still holding on. The conversion from contango to backwardation is always maximum pain at first...
 
VXX has certainly jumped on the vol spike as expected. However, with the steepness in the curve hopefully levelling off in the coming months and hopefully going back to normal contango where VXX bleeds asset value on the rebalancing, went with a long-term play on return to VXX lows by January:

Long xx VXX JAN16 $15.00 Puts @ $0.94.

Expect to see some long-term bleed out of the pricing of VXX. Looking at past history of vol spikes, VXX still bleeds value on monthly rebalancing/roll over and if we get any sort of normalcy into Oct-DEC period, VXX could be back out to $15-$17 levels. Since VXX has weekly options, I am going to see how much I can calendar this off to cut down the cost over the next few months. Current month $15 puts are at a few pennies if that so not worth it yet. Right now every day VXX is rebalancing by buying back higher SEPT futures and selling OCT futures. If the curve starts revert lower, that means the NAV of VXX will keep bleeding funds and the price of VXX will fall further down back to 15 to 17 levels. Either way, it is a small bet with 5 months or so to expiration.
 
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