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Trading volatility

based on my expectations, and the premiums among the other option chain offerings, i saw that as the cheapest. 

Honestly, i dont think the greeks pertain to the vix, do you?

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whatsyourgovt wrote:

based on my expectations, and the premiums among the other option chain offerings, i saw that as the cheapest. 

Honestly, i dont think the greeks pertain to the vix, do you?

I don’t know…. Im new to VIX options.  I know they are a bear of a product and perhaps the greeks are to sensitive to be significant when it come to pricing and decay expectations.  I know pricing is based on futures…. but what happens at expiration?  Is ATM based on the VIX or VIX futures at that point?  What strike is worthless at expiration?  If it is based on the VIX at expiration, is there a slow transition in the pricing leading up to expiration going form being based on futures to being priced on spot?

EDIT….. I need to go over this page

http://www.cboe.com/micro/vix/vixoptions.aspx

I’ll post here when I learn about the details I was worried about.

..........I learned the hard way last year what exploding delta feels like when you are short and naked

whatsyourgovt wrote:

based on my expectations, and the premiums among the other option chain offerings, i saw that as the cheapest. 

Honestly, i dont think the greeks pertain to the vix, do you?

One thing I have noticed already is that a couple hours ago all the ITM Calls had .00 for theta.  Now I am looking at them and they all read .03.  You may be right.  The greeks may be BS when it comes to these options.

..........I learned the hard way last year what exploding delta feels like when you are short and naked

^yah they def are. ISM figures aren’t going to help my case. 

pretty good pop today

^^ well done guys!

..........I learned the hard way last year what exploding delta feels like when you are short and naked

Yeah, woke up to a nice little chunk of $$$. Now we see the sobering up after the party “oh wait Brexit isn’t over yet, in fact it hasn’t even begun, maybe we shouldn’t be at all time highs?!”. 

im still paper profit. The italian banking crisis should cause some uncertainty imo. purealpha, what was your play again?

^ Short calls – I get paid $3K, and if the S&P is over 2110 on Oct31, then I have to take a $100K short (which I would like to take anyhow). Also sold some Jul29 calls. Been doing this for awhile now, usually end up closing them out early, would like to see S&P head down near 2000, and then walk away.

purealpha wrote:

^ Short calls – I get paid $3K, and if the S&P is over 2110 on Oct31, then I have to take a $100K short (which I would like to take anyhow). Also sold some Jul29 calls. Been doing this for awhile now, usually end up closing them out early, would like to see S&P head down near 2000, and then walk away.

these must be calls on SPY, yes?

..........I learned the hard way last year what exploding delta feels like when you are short and naked

I do “ES” futures, if you get assigned you take delivery of the next quarterly future. I don’t really like cash settlement.

purealpha wrote:

I do “ES” futures, if you get assigned you take delivery of the next quarterly future. I don’t really like cash settlement.

SPX is cash settled.  I figure with a short call on SPY you would get assigned short the ETF shares.  I may be wrong.  How are options on liquid futures such as ES GC CL?  Bid ask spread look ok, but not great.  Would you rather just deal with futures?

..........I learned the hard way last year what exploding delta feels like when you are short and naked

^ Oh, you were talking about the SPY ETF, not SPX, I misread.

I decided to pick one instrument type, and get familiar with how that works (too many different methods to do the same thing). Decided on futures, and options on futures. They are super liquid. They trade around the clock, so if I’m seeing something happen during China market hours, I can open/close a bet on how I think the US will react. I can short without having to worry about the dividend dates. The price means something which is nice, as opposed to an ETF price which doesn’t tell me anything. Options settle to futures. ES, VIX, CL, GC, ZN are always on my screen.

^^Thanks, PA. I appreciate that you answer my questions. In fact I appreciate all of your input on AF.
While I’m at it, I want to applogize for making a joke at your expense in the comprehension thread. It was tacky and I regret it. I’m deleting it :-)

..........I learned the hard way last year what exploding delta feels like when you are short and naked

^^Actually, nevermind….. I just noticed we can’t edit ourselves anymore. This should be interesting….

..........I learned the hard way last year what exploding delta feels like when you are short and naked

No prob. Wow, no more edit feature! Now we can’t rewrite our stock calls after the fact. :(

KMeriwetherD wrote:
^^Thanks, PA. I appreciate that you answer my questions. In fact I appreciate all of your input on AF. While I’m at it, I want to applogize for making a joke at your expense in the comprehension thread. It was tacky and I regret it. I’m deleting it :-)

keep it in your pnats

"You want a quote? Haven’t I written enough already???"

RIP

igor555 wrote:

KMeriwetherD wrote:
^^Thanks, PA. I appreciate that you answer my questions. In fact I appreciate all of your input on AF. While I’m at it, I want to applogize for making a joke at your expense in the comprehension thread. It was tacky and I regret it. I’m deleting it :-)

keep it in your pants


…..there, I fixed it for you….. because you can’t ;-)

..........I learned the hard way last year what exploding delta feels like when you are short and naked

^ HAHA!

Well, market heading up, so I just sold some calls on ES, but expiring this Friday. I wanna actually get short S&P futures if we end the week over 2110 (don’t wanna just play with options). Also sold some 2025 puts expiring Friday, both scenarios can’t happen. There is probably some silly derivatives name for this awesome trade…

purealpha wrote:

There is probably some silly derivatives name for this awesome trade…


It’s called a strangle. Kill it PA! Die ES, DIE!

..........I learned the hard way last year what exploding delta feels like when you are short and naked

The dislocation between the bond and the equity market is staggering. PA, we are up against a very very strong adversary - central banks. Have you looked at the italian banks? I’m seeing vast opportunity to profit if I can time, what i foresee as the inevitable, the bailout. 

whatsyourgovt wrote:
Have you looked at the italian banks? I’m seeing vast opportunity to profit if I can time, what i foresee as the inevitable, the bailout.

Haven’t been paying much attention. Edit: moved this post over to the main thread on the topic.

Well, I’m still darn skeptical, S&P500 holding at 2100 today.

Sold covered calls against all my AAPL stock, and my whole China A-shares portfolio. Between now and “Trump or no Trump” thinking low probability of mega-rally. Gotta make some $$$ in these sideways markets dammit.

Market going wild, very exciting, shorted futures. Sorry to be such a party pooper S&P!

^I really dislike your opinions in the WC but we are spot on when it comes to trading. I’m riding with you. 

ooooo! we are right at the June high of 2121 (SPX).  I’m going to wait and see if it rejects it there.  If it does I’m going to short promptly.  This is a good trade.  I can put in a stop at the all time high of 2134 and have all the way down as a profit zone.  I like that risk reward ratio!  I think I will get my exposure going short SPY.

EDIT: ok, I’m in.  I’m taking the resistance going on at the June high level as a sign to go ahead and take the risk.  I’m still using caution though.  I got the risk reward skew I wanted by writing an August ITM vertical call spread on SPY (strike 210.0).  Got $71 to risk $29 (per contract).  I plan to buy it back on the next drawdown rather than wait until expiration.  In the event we just keep shooting into outer space……. Well, my loss is defined!

..........I learned the hard way last year what exploding delta feels like when you are short and naked

Yeah, I like the risk/reward profile as I see it (though my probability calcs could always be crap). If I get assigned on my short call options today, then I’m roughly market neutral.

Seems like a lot of resistance above 2100. And what is realistically max-pain? Perhaps it actually hits 2200 in three months, and so a 5% loss, offset by my long portfolio gain. Shrug oh well, I’m hedged and not going anywhere then. More likely, within three months BAM down to 2000 on some worry (earnings are bad, high valuations, global earnings are bad, brexit, trump threat, china, etc).

Make some money in sideways market seems the most likely outcome, but some probability of not participating in late bull-market upside.

Yikes!  Up to 2128 on SPX! My original plan was to wait for rejection at the June high and catch a short on the way down.  I got impatient and took the trade when I did.  Impatients!  The bane of my trading.

Mehh….. at least we are ripe for a pull back next week.  I mean, we are up like 140pts in a week and a half.  Common, get real.

..........I learned the hard way last year what exploding delta feels like when you are short and naked

I guess since my 401k is substantially larger than my PA i should be happy today but my trades took a bath. I just doubled down. I thought the mantra was good news = sell off (allows fed to raise rates).