Aaaah!
Some fake ghostly job reports came out. Time for some damage control on my shorts.
You shat yourself in fear?
I might need to venture into some vix calls at these levels. Anyone currently assessing?
Looks expensive… which calls are you considering?
hahah… might as well have… Eff this Twilight Zone Economy… I’m going to the sewers see if they got jobs down there…
June ITM - beyond that i haven’t figured out which strike. Honestly, and im well aware of the huge problem with this strategy so dont jump on me about tracking error and it approaching zero, I’ve used VXX as a 1-2 day movement exposure so i might consider that too.
Ok. So I’m looking at the VIX option prices at the moment. Pretty clear that this is pricing in hugely assymetric risk. For instance, for June 13 strike, the calls are $3.50 but the puts are like 10x cheaper at $0.43. Yet, it’s obvious that the probability of above/below 13 in June is not 10:1. In other words, the option prices reflect that the calls have huge upside with small probability but the puts do not.
So if you ask me, the calls are only worth buying if you think there will be an outlying vol event between now and June, as this possibility is priced into the market.
^Solid assessment. I am by no means an option expert, and encourage guidance with this topic, but if you plan on only holding such an asset for 2-5 days max and expectto capitalise on st movement during this period, shouldnt that make price fairly obsolete?
Also, what system do you guys use for the greeks. I use TD but im not a fan on their platform TOS.
The actual VIX options are European Exercise only, hence the price disparities…
haha good to know - why are they euro only?
Probably because there’s no convenience yield, therefore it always makes more sense to sell them rather than exercise them and cash settle.
Good question, largely because there is no underlying which can be exercised early - I can’t exercise an itm call and get ‘vix’, so for settlement they use an index quote and settle to cash.
Index options are generally European. It doesn’t seem like it would be hard to cash settle based on the closing price, but maybe there are other reasons why they decided to do it like this.
I don’t quite understand why European exercise would drive the price disparity between VIX puts and calls. If anything, I would imagine American exercise would cause more disparity, since there is the additional ability to exercise at the “spikes” or something.
This is such horrible news, how will I ever recover?
Most index options are european for the same reason, there is no physical/tradeable underlying, it’s an index. SPX options <> SPY options, they have different underlyings. SPY is a tradeable basket of shares. Can’t trade VIX, SPX, etc.
I get that index is not deliverable. Just it seems like it would not be hard to exercise today, and then say cash delivery is based on that day’s official closing price. Maybe this gives rise to price volatility if a whole lot of exercises queue up on the same day.
It’s just that basic ‘intrinsic’ value of an ITM european is not going to necessarily be priced in like an american, since you can’t exercise until expiry.
How’s that L2 studying going, lockheed?