Long the Jan VIX 14/19/24 fly from 2.37 risk (30 mid), comms included. 5% allocation. Cash at 19.55, Jan futs at 19.30.
I can't model this but my experience with the vix in "no man's land" it can move 4 handles pretty fast.
I think it's pretty rich here at 19-20 cash. We'd likely be at a 16 handle w/o the fiscal cliff. I think we trade to an 18 handle on futures before expiration.
This is probably a stupid question, but, I'm an option noob. When I plug this fly into my "what-if" on Ib it gives me a max profit of like $25 per fly. Is this correct?
With fly's your trying to take advantage of a mispricing in implied vol right? How do you decide on where to set your legs on the fly? Sorry if these are really basic. I'm just curious.
I agree it's high and you see 16 within a day or two of resolution. If we go over though, you might see 25+. I have no way of modeling the implied vol of the VIX though as it's weird. I would think that VIX implieds would be high, but maybe not unwarranted. FWIW I have Jan 17 puts that have lost a lot of their value.
That can't be right. Max profit for a fly (assuming calls) at expiration is mid strike - lower strike - net debit. That's 19 - 14 - 2.37 = 2.63
Its NOT a fiscal cliff.... It's a physical cliff... Here's the proof -> http://www.youtube.com/watch?v=DgGblYWUaNU&hd=1