VIX/VXX/VX Trading Journal

[VIXFactor]

Long-time guest lurker finally deciding to take advantage of some of the smart vol traders here and post my trades and discussions on trading vol using VX Futures/VIX options/VXX options and other similar products. Hope some of the other fellow traders experienced in this area pop in to expand sharing of information and ideas. Have not seen any discussions of these products in depth so hopefully this will bring it back a bit.

Will post trades as quickly as possible in real time and do not expect any pats on the back nor any childish put downs on my choices. Will keep this up until it sinks to levels of other ET journals . I have experience with options and futures mainly on indexes and the past year with the vol instruments but prefer the vol instruments mostly.

I have nothing to buy from you and nothing to sell to you, but welcome true vol exchanges from like minded traders.

My approach is basically 2 part: 1. Making short and long term vol trades based on predictions as well as trading off of the VX Curve and some models I have of the relationship of the volatility products. I do not think you can trade any of the VIX related products without modelling them and looking for spreads or reversion plays.

I have some current trades in progress but in fairness will only post them for discussion since they were not posted here in real time.

 

[VIXFactor]

I have some current trades in progress but in fairness will only post them for discussion since they were not posted here in real time.

 

[VIXFactor]

TRADE 1:

VXX @ 16.29 Close (4:00PMEST)
Long xx VXX Aug $16.50 Puts @ $.34 (options trade until 4:!5PM EST)

Expectation is move back lower of VXX into tomorrow so this will be a trade closed out tomorrow no later than market close. Model trade looking for VXX/vol pullback. I am leaving off the size of my positions because looking at other journals it always leads to irrelevant discussions. All these products are liquid so will work at any size.
Trade in VXX rather than VX/VIX due to limited risk/margin and other positions already open.

 

[windwine]

TRADE 1:

VXX @ 16.29 Close (4:00PMEST)
Long xx VXX Aug $16.50 Puts @ $.34 (options trade until 4:!5PM EST)

Expectation is move back lower of VXX into tomorrow so this will be a trade closed out tomorrow no later than market close. Model trade looking for VXX/vol pullback. I am leaving off the size of my positions because looking at other journals it always leads to irrelevant discussions. All these products are liquid so will work at any size.
Trade in VXX rather than VX/VIX due to limited risk/margin and other positions already open.

Thanks for the sharing. Are you trading vol mainly based on long-medium term trend following or short-term mean reverting? I guess this trade is based on mean reverting+a still favorable contango. BTW, I have not really traded with VXX options or VIX options so I have a naive question that if you are correct about the direction wouldn't the bid-ask spread and high premium make them worse choices compared to direct VXX or VX future bet after adjusting for leverages? I guess most people are betting on directional moves in vol but not a range bound oscillation.

 

[VIXFactor]

Thanks for the sharing. Are you trading vol mainly based on long-medium term trend following or short-term mean reverting? I guess this trade is based on mean reverting+a still favorable contango. BTW, I have not really traded with VXX options or VIX options so I have a naive question that if you are correct about the direction wouldn't the bid-ask spread and high premium make them worse choices compared to direct VXX or VX future bet after adjusting for leverages? I guess most people are betting on directional moves in vol but not a range bound oscillation.

Wind,

Thanks for the questions.

I trade both short and long term on vol depending on the product and what I see. Some trades are just pure directional and some are based on modelling and seeing an entry. I look at a few things and wait to see what looks appealing.

This specific entry is based on a VXX modeled pattern that did not seem to work as well when I tested VIX/VX (go figure...). Also I use those products for other types of trades and do not want to mingle. You are right that the b/a spread and less than 1.00 delta of these options might not make them as attractive as shorting VX active month or shorting VXX outright. The short answer is I get better leverage using the puts v. the short VXX stock outright so I try to use slightly ITM options for as much delta as I can get v. cost and risk. I would love to short 10,000 shares for the scalp but not at that margin level yet in this account. My goal is to get there and short the VXX directly and have been testing that as well.

As for VX short outright I use the VX for other type of model trades and therefore sometimes have VX active month already in a position and cannot do another overlapping trade. So I use VXX instead to keep my other options open for other trades.

VXX is not perfect but I have had enough success with slightly ITM VXX options for this specific trade to accept the b/a spread and lack of 1:1 move to work, especially for 1 day type swing.

I have not tested neutral option strats on VIX to take advantage of range bound movements (short straddles, FLYs, etc..)

-VF

 

[VIXFactor]

Current Positions

I have a few positions in place before I started writing it here and although it is not real time I want to list a few for discussion purposes:

Long SEP VX Futures @ 15.40
Expecting SEP vols to move higher this week into next - Short term play


Calendar: Long December @ 16.775
Short November @ 16.45
NET: .325
Longer-term play on the curve, expecting this spread to widen as we approach Nov expiration. Expecting higher vols into October and some normalcy in Nov - very macro view. DEC future vols usually discounted down into the future due to DEC expectation and flater curve between NOV-DEC. Looking for this to steepen as we get past SEP-OCT period. Might look into converting this to VIX Calendar with Puts for this trade to reduce risk. RISK here is we get huge vol spikes as we move into OCT and backwardation in the curve.

These were entered into the past few days and though not real time are part of some of the positions I have and worth following.

 

[VIXFactor]

Trade entered last week but worth following:

VIX Call Calendar
Long NOV VIX 21.00 Calls @ 1.57
Shrt AUG VIX 21.00 Calls @ .14
Net Debit: 1.43

AUG expired worthless this week Tuesday/Wed settlement

Sold SEP VIX 21.00 Calls @ .74

NEW NET DEBIT = .69

Play on increasing vols into SEP/OCT. Hoping I can roll this 2x (after Aug and SEP) and can have the 21 Call at almost no cost for possible continued increased vols into Oct. Even if VX does not get above 21, the increasing expectation of vols will keep a premium in the NOV 21.00 Calls and a nice profit. For reference, the OCT 21.00 Calls which are 2 months out are trading at 1.30. Assuming the current environment stays the same, looking for NOV Calls to be close to that in Sep.

RISK: as always a huge VIX spike by SEP expiration leading to any backwardation in VX curve.

 

[newwurldmn]

I like that Nov, Sep spread.

 

[VIXFactor]

TRADE 1:

VXX @ 16.29 Close (4:00PMEST)
Long xx VXX Aug $16.50 Puts @ $.34 (options trade until 4:!5PM EST)

Expectation is move back lower of VXX into tomorrow so this will be a trade closed out tomorrow no later than market close. Model trade looking for VXX/vol pullback. I am leaving off the size of my positions because looking at other journals it always leads to irrelevant discussions. All these products are liquid so will work at any size.
Trade in VXX rather than VX/VIX due to limited risk/margin and other positions already open.

Initial pop on open, doubled the position with more puts at .14

NEW COST BASIS = .24

More aggressive play for me but my other long vol positions are doing well, I feel intraday we will see some pull back on this /ES, /NQ vols breakdown to allow me to profit.

 

[VIXFactor]

Nice website to review the VIX futres term structure and look at historical data, as well as contango and spreads. VixCentral.com