Man, this timtim guy is really good. Don’t waste his valuable time with stupid questions people.
timotimo is the man. probably that kid timmy from wall street warriors.
Timo, What did you do to make money? VIX spiked hard today, so I am assuming you wrote far OTM calls? Or wrote calls and covered your positions on the downspike?
" I still have trouble grasping how they can have value at all, it’s like magic" -John Meriwether, LTCM
timotimo Wrote: ------------------------------------------------------- > VIX is like a rubber band, the more you stretch in > out the more force it will snap back. Moreover, > the more you stretch it the more force you need to > keep it stretched… Yes, volatility is a mean reverting process… in the long run. > And since the VIX Options like almost Options > which act like sponges, they soak up information > (in the case of VIX, volatility) very fast, this > is strange since they are so thinly traded(for > some reason people think high volume is needed for > correct prices(this is true, however the VIX is > based on the SPY options, which is based on the > SPX index which is based on 500 stocks that need > to meet volume requirements(I think)). There is > great profit to be made when options are > miss-priced so they rarely are(some of the most > skilled math nerds are behind option trades…). Yowza, I hope you’re kidding. Your explanation is incorrect in many ways, and there is zero chance that you are pricing volatility-of-volatility more accurately than a large bank’s index desk. You are engaging in rote speculation and this story does not usually end well. *** Writing calls on the VIX is extremely risky ***. Do not try this at home kids.
timotimo Wrote: ------------------------------------------------------- > also while I wasted time composing this the VIX > has dropped to 34.48 and the options I sold are > profitable and Timotimo scores again…what is > the saying about fools and markets? Good question, timotimo. Looks like you got crushed if you tuned out over the last couple hours. VXX: up 12.0% VXZ: up 7.4% You: down mid-teens
jbaldyga and justin88, thanks for your thoughts. I’d be interested in following up with some questions via e-mail. Can you drop me a line at porcupines@gmail.com when you have a moment? Also have you seen SixFigureInvesting.com? It has some interesting opinions on the VIX. Would be curious to hear your thoughts.
I spent months researching the VIX and VIX options, including several visits to the CBOE to speak with the designers and floor traders. I designed a few trading strategies which were ultimately profitable, but the bottom line is these are sh2tty trading tools. Think about what you’re trying to figure out here - the market’s perception of volatility at some random date in the future. Because of this, and that they’re European options, means they don’t move at all like an equity option. Short calls means you’re short vol of vol, which sounds to me like a good way to get your face ripped off. Anyone sophisticated enough to be making actual judgments about this sort of stuff is trading vol swaps.
SuperiorReturn Wrote: ------------------------------------------------------- > Timo, > What did you do to make money? VIX spiked hard > today, so I am assuming you wrote far OTM calls? > Or wrote calls and covered your positions on the > downspike? yes I sold deep OTM options, I am very lucky, but I’m deep in the red. However only a few days until they expire and they will expire worthless(100% sure). I was outside and did not cover. I’m mostly out of the market as all the puts made pretty nice profits( I was very lucky). And I’ve already admitted I made losses in most of 2009 and am currently long SPY calls and I do believe the market as a whole dropped too much this week. And if you find my posts annoying there is a link next to my name “[hide posts from this user]”, click it and you’ll never see my posts again…
timotimo Wrote: ------------------------------------------------------- > yes I sold deep OTM options, I am very lucky, but > I’m deep in the red. However only a few days until > they expire and they will expire worthless(100% > sure). I was outside and did not cover. I’m mostly > out of the market as all the puts made pretty nice > profits( I was very lucky). > Are you familiar with the VIX options settlement process? Here’s a hint: It’s not based on the VIX. It’s also eminently game-able by those who understand how it works.
> And I’ve already admitted I made losses in most of > 2009 and am currently long SPY calls and I do > believe the market as a whole dropped too much > this week. > If you think implied volatility is too high (you’re short vix calls), then why are you long vol (long spy calls)? Better to be short puts or long call spreads.
> And I’ve already admitted I made losses in most of > 2009 and am currently long SPY calls and I do > believe the market as a whole dropped too much > this week. > If you think implied volatility is too high (you’re short vix calls), then why are you long vol (long spy calls)? Better to be short puts or long call spreads.
NakedPuts Wrote: ------------------------------------------------------- > timotimo Wrote: > -------------------------------------------------- > ----- > > yes I sold deep OTM options, I am very lucky, > but > > I’m deep in the red. However only a few days > until > > they expire and they will expire worthless(100% > > sure). I was outside and did not cover. I’m > mostly > > out of the market as all the puts made pretty > nice > > profits( I was very lucky). > > > > Are you familiar with the VIX options settlement > process? Here’s a hint: It’s not based on the > VIX. It’s also eminently game-able by those who > understand how it works. I can’t make a trade I can’t handle, my broker won’t let me… Ironically derivative brokers understand risk and have limits on the most aggressive accounts. More Ironically my brokers prime broker is Goldman Sachs. Makes my short position on their stock even sweeter if it makes $$$, any they probably are grinning when it it expires worthless.
AnotherLurker Wrote: ------------------------------------------------------- > > And I’ve already admitted I made losses in most > of > > 2009 and am currently long SPY calls and I do > > believe the market as a whole dropped too much > > this week. > > > > If you think implied volatility is too high > (you’re short vix calls), then why are you long > vol (long spy calls)? Better to be short puts or > long call spreads. My SPY calls are for sep and are semi-deep in the money, it is as close as I’ve been to an investment in a while
I remember watching the ticker on my desk fall like it was possessed. It was the most helpless feeling in the world. Especially when you realize your team spends over 30k/year to have the best technology/news/quotes and no one can figure out WTF is going on.
VIX at 28.33… once again I’m correct and also the SPY calls I purchased are up 3K too
timotimo Wrote: ------------------------------------------------------- > VIX at 28.33… once again I’m correct and also > the SPY calls I purchased are up 3K too So you foresaw a euro back stop and the IMF/ECB/Euro nations buying soverign debt, even though as late as thursday all the aforementioned groups where VEHEMENT about not purchasing thier debt. Do you have knee pads for me? Cause I want some of your smart juice.
timotimo Wrote: ------------------------------------------------------- Ironically derivative brokers > understand risk and have limits on the most > aggressive accounts. More Ironically my brokers > prime broker is Goldman Sachs. Makes my short > position on their stock even sweeter if it makes > $$$, any they probably are grinning when it it > expires worthless. This is pretty much the exact opposite of irony.
timotimo Wrote: ------------------------------------------------------- > VIX at 28.33… once again I’m correct and also > the SPY calls I purchased are up 3K too As you mentioned earlier, it’s perfectly reasonable that you have different views (bullish/bearish) on volatilities of different underliers or different expiries of the same underlier. They may have some correlation but are different and thus deserve different pricing. Glad to hear you didn’t get carted off to debtor’s prison. You seem to have strong conviction and a willingness to pull the trigger, which are important traits in a trader. That’s a start. It’s important to note that, just because you made money on the trade, doesn’t mean you were “correct” a priori. For instance, if you have a 20 in blackjack, say “hit me”, then get an ace for 21, the hit was only the right strategy post hoc.
numi Wrote: ------------------------------------------------------- > jbaldyga and justin88, thanks for your thoughts. > I’d be interested in following up with some > questions via e-mail. Can you drop me a line at > porcupines@gmail.com when you have a moment? Email sent.