When to buy VIX calls?

[iprph90]

imo, one of the best ways to capitalize on volatility is to think of it in cliche terminology:

"expect it when you least expect it":

iow, be patient, wait, then wait some more, until you have forgot about what you were waiting for, then and only then, go on a shopping spree buying dotm index puts.

“Have patience with all things, but chiefly have patience with yourself.”

 

[sle]

Quote from sellindexvol66:

i would take the suggestions of others and look at spx put spreads, etc. if you must try vix, consider a long itm call spread.

Yep. Also, I've had good experience trading VIX 1x2s (or any other ratio spreads). Obviously you have to evaluate the skew and the current level of vol - both buying and selling ratio spreads works, but in different conditions.

 

[Betapeg]

Quote from klurby:

As we all know the market has made a big really this past week. We also know that the rally won't continue forever. The question is when should we buy VIX calls? Will the time be right at 15.00, 14.00, or 13.00? Lets put all of our knowledge together and find out how to profit from these VIX Calls.

I don't trade VIX options but if I was going to, I might do a trade like this.

SELL -10 VIX 100 AUG 11 15 PUT @.25 LMT

I would sell 10 VIX August 2011 $15 put options for a $250 premium. The margin requirement would be $2354. This gives a 10% ROI on the trade if the VIX options expire OTM. There are 44 days until expiration so I would want the VIX to stay above $15 during that time. If the VIX is above $15 in 44 days, the options expire worthless, and I keep the premium. This trade would be for a $100,000 account which allocates a maximum 2% to any one trade. The $2354 margin requirement roughly meets this criteria. If you have $1 million, you can sell 100 puts and make 10x the money.

 

[klurby]

Hello Beta I really like your idea. Your strategy seems very similar to mine, collecting premiums and taking advantage of time decay. Very nice.

 

[iprph90]

Quote from Betapeg:

I don't trade VIX options but if I was going to, I might do a trade like this.

SELL -10 VIX 100 AUG 11 15 PUT @.25 LMT

I would sell 10 VIX August 2011 $15 put options for a $250 premium. The margin requirement would be $2354. This gives a 10% ROI on the trade if the VIX options expire OTM. There are 44 days until expiration so I would want the VIX to stay above $15 during that time. If the VIX is above $15 in 44 days, the options expire worthless, and I keep the premium. This trade would be for a $100,000 account which allocates a maximum 2% to any one trade. The $2354 margin requirement roughly meets this criteria. If you have $1 million, you can sell 100 puts and make 10x the money.

FYI:

in early aug 2006 the vix dropped from 15.50 to 11.50 in a matter of a couple of weeks.

this is one of the most imprudent trades i have ever come across!!

what a total waste of time even if it expires worthless.

 

[Whistlingleaf]

What do you guys think about VIXY or VIXM ?

(not everyone has a futures account)

 

[Betapeg]

Quote from iprph90:

FYI:

in early aug 2006 the vix dropped from 15.50 to 11.50 in a matter of a couple of weeks.

this is one of the most imprudent trades i have ever come across!!

what a total waste of time even if it expires worthless.

Why do you think I don't trade the VIX!? I did said this is what I would do if I traded VIX options

 

[ForexForex]

Quote from atticus:

Even if you sell the high print on SPX doesn't infer that you'll avoid an ass kicking. You're buying variance. If we creep along in a channel you will lose. Don't buy VIX in the Summer months.

You're better off selling index calls/call spreads.

Perhaps buying calls would be better.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=223010

 

[sle]

Quote from Betapeg:
SELL -10 VIX 100 AUG 11 15 PUT @.25 LMT

I would sell 10 VIX August 2011 $15 put options for a $250 premium. The margin requirement would be $2354. This gives a 10% ROI on the trade if the VIX options expire OTM. There are 44 days until expiration so I would want the VIX to stay above $15 during that time. If the VIX is above $15 in 44 days, the options expire worthless, and I keep the premium. This trade would be for a $100,000 account which allocates a maximum 2% to any one trade. The $2354 margin requirement roughly meets this criteria. If you have $1 million, you can sell 100 puts and make 10x the money.

I would say that's not the wisest trade out there - you are selling puts on an asset with a positively-sloped term structure and thus you will have a pretty strong negative drift. While I agree, vol of vol is high and selling it looks attractive, I would be very reluctant to sell puts with a strike that's more or less equal to the ATM spot level.

 

[rosy2]

i would do an ATM put ratio write