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pthomas215
1,251 posts
msg #131634
- Ignore pthomas215

9/30/2016 2:40:39 PM

I think i get it now...thank you.

BarTune1
441 posts
msg #131638
- Ignore BarTune1

9/30/2016 3:10:23 PM

I did some reading and it may be possible to construct a synthetic long on the VIX by buying a near-term VIX call and selling a near-term VIX put. Normally a Call - Put = forward or synthetic stock. You could create a synthetic short by selling the call and buying the put.

Looking at the CBOE site today ... they have the VIX trading at 12.77 down 1.25 (delayed).

There seems to be decent volume on October 2016 (Expiration: 10/05) calls and puts.

The call shows

VIX1605J13.5-E 0.70 -0.90 0.55 0.70 2687 3065

The put at the same strike shows

VIX1605V13.5-E 0.50 +0.30 0.40 0.55 4757 14346

If you were long the call ... you'd be down 90 cents on the contract and you'd also be down 30 cents on the put as its up today 30 cents. The last column is volume so there is decent liquidity in these contracts.

The net combination is that you'd be down $1.20 today on this synthetic VIX share whereas they have the VIX being down $1.25 (almost 10%). That looks like decent tracking. I have the VXX down 4.92%.

I'm not sure about all this - I've traded alot of options but never VIX options on the CBOE. Just putting this out there for discussion purposes.

Kevin_in_GA
4,599 posts
msg #131645
- Ignore Kevin_in_GA
modified

9/30/2016 9:57:23 PM

SIGNALS FOR MONDAY 10/3/16

A NEW LONG BUY SIGNAL WAS TRIGGERED FROM VIX LONG SIGNAL #9.

OPEN TRADES	Date Opened	^VIX Opening Value	Date Closed	^VIX Closing Value	Net Gain/Loss (%)
LONG ^VIX	9/27/2016	13.36	- - - - -	13.29	-0.52%
LONG ^VIX	9/28/2016	12.90	- - - - -	13.29	+3.02%

CLOSED TRADES	Date Opened	^VIX Opening Value	Date Closed	^VIX Closing Value	Net Gain/Loss (%)
SHORT^VIX	8/29/2016	14.07	9/8/2016	11.76	+16.42%
LONG ^VIX	9/6/2016	12.54	9/12/2016	20.13	+61.66%
LONG ^VIX	9/9/2016	12.44	9/12/2016	20.13	+60.37%
LONG ^VIX	9/13/2016	15.98	9/14/2016	17.63	+10.32%
SHORT ^VIX	9/12/2016	20.13	9/19/2016	15.16	+24.61%
SHORT ^VIX	9/9/2016	12.52	9/22/16	13.41	-7.28%
SHORT ^VIX	9/12/2016	20.13	9/22/16	13.41	+33.32%
SHORT ^VIX	9/14/2016	17.63	9/23/16	12.02	+31.74%

mahkoh
1,065 posts
msg #131648
- Ignore mahkoh
modified

10/1/2016 6:05:31 AM

My take:

For long signals sell deep in the money ^VIX calls 2 - 3 weeks out. The premium involved is usually over 70 % so you have a big time decay advantage.

For short signals use this filter

The top pick will give you the stock that most correlated with ^VIX during the last 20 days. No guarantee that it will perform likewise in the next 10 days, but it may be the best guess.

dtatu
143 posts
msg #131649
- Ignore dtatu
modified

10/1/2016 7:57:49 AM

mahkoh,
re.For long signals sell deep in the money ^VIX calls 2 - 3 weeks out. The premium involved is usually over 70 % so you have a big time decay advantage:

maybe you could give us an example , this weekend, of a choice of a deep in the money call?
Not sure it's clear for me. Why would you sell short calls if you get a Buy signal? I'd rather do it on the system Sell signal?
When VIX goes up, it goes in big fast spikes,which could give you big drawdowns on the short calls.

tennisplayer2
210 posts
msg #131650
- Ignore tennisplayer2

10/1/2016 8:38:11 AM

Kevin, did you get a trigger by VIX long filter #9 for a new ^VIX buy for Monday? Thanks.

Kevin_in_GA
4,599 posts
msg #131651
- Ignore Kevin_in_GA

10/1/2016 9:46:50 AM

Kevin, did you get a trigger by VIX long filter #9 for a new ^VIX buy for Monday? Thanks.
+++++

I run this on two machines - one gave me the BUY signal and the other didn't (even though as far as I can tell the settings are identical). Given this confusion I opted not to report it - glad to see others are using the SS codes!

I would say that if you are seeing it and I am seeing it (at least once) that it might be a viable signal. Anyone else running this on SS and if so what were your results?

dtatu
143 posts
msg #131653
- Ignore dtatu
modified

10/1/2016 9:52:15 AM

mahkoh,
re.For long signals sell deep in the money ^VIX calls 2 - 3 weeks out. The premium involved is usually over 70 % so you have a big time decay advantage:

I also noticed that, actually, VIX Options have their underlying the VIX Futures and not VIX spot: if you look at the Oct 18 expiration, you will notice that the option which has a delta of 50% ( the At The Money) is the 16 Call ( the price of the Oct futures) and not the 13.5 call ( the price of the Vix index).
This means that : VIX index has options based on the price of the VIX Futures ? that's really confusing ( like many other things in VIX).

In conclusion, your plan to sell deep in the money options for their High Time premium seems to have no validity, as , for example, Oct 18 10 call goes for 5.50 bid-5.90 ask ( underlying Oct VIX future at 15.95) which is actually at a discount, with Zero Time premium in it and 100% Intrinsic value!);
this would make the case for using deep in the money options to mimic the VIX futures (not the index, though);
but then ,why bother with options instead of going long the Futures?

dtatu
143 posts
msg #131654
- Ignore dtatu
modified

10/1/2016 10:07:53 AM

I think I'll start tracking your signals and trade, as I explained, for a while, on paper, the Futures spreads F1-F2 ,( I'll use only 1 contract in the beginning) using the official open of both to calculate the spread, and let you know, guys, about the results.

gmg733
788 posts
msg #131655
- Ignore gmg733
modified

10/1/2016 11:48:14 AM

@dtatu

Vix is based upon Spx volatility of index options.

I've been looking at this surrogate issue a little bit and I think I have a solution, potentially.

Before I get into it I preface the conversation with this. I've been selling call spreads on Vxx for several weeks based upon the notion of drag and its affect. Simply put it is a profitable strategy and you get a higher probability of profit if Vix pops above 20. Simply put I was working on this prior to this thread based upon an idea I got from a post on slopeofhope.com

Now, before I lay this out I wanna be clear this is the way I trade. I don't want to get into all the details but I trade options a certain way and make money doing it.

First thing to note and realize is Vix options have European settlement. If you do not know what that means do not trade options. I'm not being a prick but know the instrument you are trading. In short they trade like American options but settle like European. So no risk of assignment. Check! For Vix short signals, sell an ITM call spread where the sell is deeper in the money and the buy is at the money. For Vix long signals, sell a deep in the money put and buy an at the money put. Why? Great question. For defined risk trades it is less about volatility mean reversion and more about a direction play. In this case selling a put spread is bullish and your hoping the Vix pops or goes up. Inversely, you sell the call spread if you feel volatility will drop or mean revert. In short, it becomes a delta trade with the benefit of theta not hitting you over the head. What scares me is the put spread. Collapsing vol in the call spread will help this trade. But I have not figured out just yet what expanding vol will do to the put spread. My hypothesis is it will be more of a delta trade.

I have not traded Vix option this way yet. I'm trying to ascertain the best way to paper trade it. Right now I'm thinking of a risk one to make one risk/reward ratio. More work to be done here on my end.

Dissenting opinions are welcome.

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