Eleven dollar VIX

Hold. My. Beer.

VIX is not denominated in dollars. It is a unitless quantity, the square root of implied variance.

I didn’t know that. I guess I look like a fool now - but not as much of a fool as you will, if you don’t buy calls on that sht.

This might turn into another one of those threads. You can’t buy call options priced on spot VIX, since spot VIX is unhedgeable. Those options are valued using the forward price at their expiration date. So, for instance, if you bought call options expiring on 8/21/2018, they would be valued with a forward price of 12.7 (according to the chart below at this time). In the mean time, this forward price will decay into a typically lower level that you observed earlier.

The same argument applies to VIX futures. You can’t just “buy VIX” at a low level and wait for it to spike. You will have to pay a lot of decay while holding the position.

Anyway, it’s not you. Almost no one outside the derivatives business seems to understand VIX, even though many of them talk about it and even use money to trade VIX derivatives…


Well, this is embarrassing. I knew none of that. I’ll be creating a new username though, because there’s no coming back from this.

pa is my go-to for volatility questions.

Ohai is my go-to, because he knows a lot about volatility. Remember, the daily volatility of his portfolio exceeds the GDP of Micronesia.

Well, now that you guys know I’m borderline-retarded, and have nothing to lose, I might as well try to gain something from all of this.

So question, judging by the contango structure the market in the link ohai posted, I’m best off actually shorting vix? Because that whole roll return thing? But, that’s only what the market expects right? Which means, the 20 grand I borrowed from my 401K to buy VXX with in mid-july, probably wasn’t a good investment. Unless of course, the market tanks 3,000 points next week and I make out like a bandit. As to which point, it would obviously be only luck.

  1. In general, yes you will make money shorting VIX. The risk is that a one time vol spike will wipe out a sizeable amount of your position.

  2. Actually yes, when VIX is the lowest, it’s the best time to short VIX, due to term structure. This is counterintuitive. However, you must be disciplined in closing the position when term structure starts to flatted. If short VIX guys had followed this, they would have closed out in January and would not have lost all their money in February, for instance.

Bought puts for SPY on 8/7 at $286 and calls on UVXY at $8. Closed both this morning.

This guy is hilarious. :+1:

Dumb enough to borrow on my 401K - check

Lucky enough to pull it off - pending