Author Topic: Fun with VIX options  (Read 29304 times)

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #300 on: March 09, 2018, 12:24:16 PM »
UVXY has seen some weird price action against the VXX but has recently seemed to settle into returning 1.5x of VXX daily.  If I hold my puts to expiry, I should come within spitting distance of break even.  I have a lot of "dead money" in that trade!
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ChpBstrd

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Re: Fun with VIX options
« Reply #301 on: March 12, 2018, 04:50:57 PM »
We're back in contango on the VIX futures.

http://www.tradingvolatility.net/p/datasourceurldocs.html

Now we get to see how UVXY performs in a normal environment after their restructuring.

hodedofome

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Re: Fun with VIX options
« Reply #302 on: March 20, 2018, 08:14:38 AM »
VIX futures flip flopping between backwardation and contango every week now. The volatility of volatility continues...

starguru

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Re: Fun with VIX options
« Reply #303 on: May 21, 2018, 01:19:07 PM »
So is this trade now dead after the UVXY went to 1.5x?   My PuTs are still down about 80% even thought the UVXY price is only about 20% more than when I bought them.


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Financial.Velociraptor

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Re: Fun with VIX options
« Reply #304 on: May 21, 2018, 03:52:23 PM »
So is this trade now dead after the UVXY went to 1.5x?   My PuTs are still down about 80% even thought the UVXY price is only about 20% more than when I bought them.


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I am holding 76 of the 6 strike 17JAN2020 expiry puts.  I purchased at 4.35 and they currently sit at 2.55.  That is an unrealized loss of 13,756, which is the main driver of my portfolio so far this year (still down 3,418 ytd.)  I expect around the time the underlying gets down to the 6 strike, they will be close to breakeven.  That is just a spitball estimate based on what I see the Greeks doing at the moment.  I will sell either way at 6 and sit out a month to avoid the wash sale if necessary.  I will also be evaluating whether to take a tax loss harvest in late December on this trade if we are not close to 6 by the time.  That could go either way depending on where I stand versus collecting Obamacare credit.

I think the trade still works so long as you have an entry price that is based on 1.5 leverage.  Having an entry that is based on 2.0 and needed to sell based on 1.5 is a killer and has left me with more than a year's worth of 'dead money'. 

What to do I think largely depends on your tax implications.  Do you want recovery in the current period or the next one for tax purposes?  At some point you probably have to take the hit if you bought when leverage was 2x...
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ChpBstrd

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Re: Fun with VIX options
« Reply #305 on: May 21, 2018, 08:52:24 PM »
So is this trade now dead after the UVXY went to 1.5x?   My PuTs are still down about 80% even thought the UVXY price is only about 20% more than when I bought them.


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The 1.5x leverage has somewhat stabilized UVXY, but the options pricing should simply adjust to the slightly lower volatility. Maybe instead of buying puts $10 OTM you now sell them at $7 OTM.

As for me, the past 6 months has demonstrated what a loose cannon the Trump administration is, and how betting on low volatility is no safe bet at all in this environment. Rising consumer debt, interest rates, and oil are other reasons not to bet on volatility staying low. So for me, it seems like there was a season for this trade and that season has probably passed. I only own a couple $6 puts and they have a limit order that was almost hit today.

starguru

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Re: Fun with VIX options
« Reply #306 on: May 22, 2018, 07:19:24 AM »
Yeah I have the Jan 2019 $6 PuTs and have the feeling I’ll lose it all.  Not sure if I should sell and take the significant loss or just ride it out.  There is still months.  No tax implications as this is in an IRA.


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talltexan

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Re: Fun with VIX options
« Reply #307 on: May 22, 2018, 02:11:06 PM »
I had a habit of dividing my money into two contracts always. The thought was that--in the short term--one could get wiped out--but the other would stay alive and keep me going.

My June options are basically a cup of coffee this stage. My September options are down about 85% from where I bought, but they're enough that I could roll them to something later. With the June ones getting wiped out, it's probably best to roll them to two different times to keep this same approach going.

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #308 on: June 06, 2018, 03:29:13 PM »
Since February, I have been shorting VXX.  I'm up to 728 shares with proceeds of 29,488.  Unrealized gains sit at 5,988.  It is costing me about 100 a month in borrowing fees.  Anyone else in this trade?
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thunderball

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Re: Fun with VIX options
« Reply #309 on: June 06, 2018, 04:15:02 PM »
Since February, I have been shorting VXX.  I'm up to 728 shares with proceeds of 29,488.  Unrealized gains sit at 5,988.  It is costing me about 100 a month in borrowing fees.  Anyone else in this trade?

No, but looking at the chart, I wish I were!  Nicely done.

eudaimonia

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Re: Fun with VIX options
« Reply #310 on: June 06, 2018, 05:07:34 PM »
I haven't been short continuously since February. I was actually long VXX going into the huge vol spike and then went to cash until beginning of May when the /VX curve and Skew became more normalized. Currently, short VXX via a synthetic June 15 combo of short calls and long puts. 12 of these combos (since May 5th) and up about $10k.
« Last Edit: June 06, 2018, 05:12:48 PM by eudaimonia »

talltexan

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Re: Fun with VIX options
« Reply #311 on: June 07, 2018, 08:25:51 AM »
I'm sad to admit I didn't have the guts to put more into this trade. My June options are cooked. My September options have doubled in the last month, but I didn't put more in at the low-point. Staying with this trade requires fortitude.

ChpBstrd

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Re: Fun with VIX options
« Reply #312 on: June 07, 2018, 02:29:11 PM »
I've decided the low-vol bet is not for me during the Trump administration. Dude is setting little fires everywhere - and at market peaks! Tariffs? Really?

Given the near certainty of problems, I'm beginning to understand the appeal of 2020 UVXY long calls, although I can think of many cheaper lottery tickets.

hodedofome

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Re: Fun with VIX options
« Reply #313 on: June 08, 2018, 01:38:50 PM »
Since February, I have been shorting VXX.  I'm up to 728 shares with proceeds of 29,488.  Unrealized gains sit at 5,988.  It is costing me about 100 a month in borrowing fees.  Anyone else in this trade?

I've been short a few years now. I did cover a bit during the spike, as I was getting concerned about margin, but I'm still in.

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #314 on: June 08, 2018, 05:57:54 PM »
Since February, I have been shorting VXX.  I'm up to 728 shares with proceeds of 29,488.  Unrealized gains sit at 5,988.  It is costing me about 100 a month in borrowing fees.  Anyone else in this trade?

I've been short a few years now. I did cover a bit during the spike, as I was getting concerned about margin, but I'm still in.

Have you ever been forced out due to broker inability to borrow shares?
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hodedofome

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Re: Fun with VIX options
« Reply #315 on: June 11, 2018, 09:39:05 AM »
Since February, I have been shorting VXX.  I'm up to 728 shares with proceeds of 29,488.  Unrealized gains sit at 5,988.  It is costing me about 100 a month in borrowing fees.  Anyone else in this trade?

I've been short a few years now. I did cover a bit during the spike, as I was getting concerned about margin, but I'm still in.

Have you ever been forced out due to broker inability to borrow shares?

I've never been forced out of short VXX, even after the huge spike this year.

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #316 on: June 12, 2018, 01:59:52 PM »
I closed my 6 strike puts today after an unlikely to be filled limit order cleared the market.  I booked a 13k+ short term capital loss.  That probably gets me qualified for the maximum ACA subsidy again this year so it isn't all bad.  I'm sitting out the trade for a month (wash sale rule) and then getting back in with a 5% notional exposure to UVXY as a synthetic short.  With the underlying 1.5x leverage, my net exposure from the short call will be 7.5%.  The early year volatility event caused UVXY to roughly double so I set my exposure at level that will top out my exposure between 15 an 20%. 

I'm letting my VXX direct short wind down.  The trade "works" but the hard to borrow fee is eating into me at about 100 dollars a month even during the current low vol environment.  I'd rather be synthetic and I'd rather play the 1.5 leverage.  I'm not buying to close, I'm just letting the current shares decay to zero.  IB doesn't allow fractional shares so I'll naturally exit the trade a little bit at a time as the result of multiple reverse splits.
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