I believe that is correct, so technically it is building value right now while the front of the curve is still inverted, locking in the gains and rolling to the next contract.
Sorry, I wrote it backwards, you are correct. My point was that as it re balances into October by SELLING SEP and BUYING OCT with the current curve shape and THEN if the curve flattens in the front or gets back to contango then the higher bought futures will bring the value down as hopefully these higher value contracts are moved to the next months at lower values. Assuming we see a relaxing of vols in the next couple of weeks then right now it is buying VX contracts that I hope/expect to fall with the correction in the curve and VXX will come down with it. Of course the curve could stay elevated in the front month into Oct if we get a really bad market so that is why I chose JAN options to allow time for the front to drop off as the market moves from fall to chop. I apologize if my mix up made that confusing and thank you for catching that error.
Big swing up in the front months but the back months have stayed relatively flat rising in unison. Some possible plays on the -DEC/+JAN or DEC/JAN/FEB short FLY but still too early to touch that IMHO. Question is whether VIX will start to come down if the fear/uncertainty subsides in the next week or else Sep VX will start drifting to 30 into expiration.
I am not an options expert, so forgive me if this is a naive question: In hindsight, what would have been a good way to take advantage of the extreme implied volatility of VXX options on Monday without exposing oneself to VXX directly? That is, how to bet on IV coming down without taking a directional position on the underlying?
Are any of you all messing with SVXY? I've start building a small position this week adding on the dips. I was contemplating selling half while it was up today, but didn't act. That is okay though, I am quite comfortable adding more to it if we fall further. I am still at less than half of my desired position, so no complaints off a dip.My avg cost is about $55, but will hopefully bring that down more soon
good points made. the DJF fly is a short vol trade so you really need to wait for either some back steepening or spot to bang below dec...u have time to enter that...but if we ever hit contango again..that fly is worth 20 cents with ease. its a safe trade. otherwise, if you are seeing a 20 spot, any spread will pay..its all direction though. very little fly edge i can see currently.
I think the short VX futures ETN can work now but you might have to hold for a while until you see the returns since a sharp sell off like we had in the markets gets a bounce and then it keeps the violent nature until the market short term memory wears off. I took a similar position by buying the deep OTM VXX puts for January. I would suggest looking to see if the ETNs of interest have options traded but that is just my bias for options/futures v. buying the etn outright .
My problem is the NOV portion of the FLY has lifted with SEP/OCT so I have to sit on it for some time now. I agree the curve has flatten at parts making the longer term FLYs premature but the risk still in the front two months has made me wary of any outright calendars. I need VIX to break 20 on a another day or two like the last two. I do not expect a large Friday up day with the weekend and a holiday the following weekend. I have to sit tight as well on my NOV/SEP VIXCall calendar because the SEP options still have 2.00 points of time value/vol in its pricing. IS IT ME or did the VX pricing push upward evne though we closed near the highs of the day in SPX?? Both VX and VXX rallied into the close hurting my VXX position which was up $0.30 at the open...