How to trade the VIX at a discount brokerage

Discussion in 'Trading' started by perkindiafrawl, Mar 26, 2009.

  1. Hi,

    I'm looking into how to long/short the VIX from a Schwab account.

    One possibility is to long puts and calls, but the bid-ask spread is huge (50 cents for in-the-money) and options are not conducive to long-term trades.

    I'm just curious if there are any other possibilities that I'm missing? I haven't been able to find a VIX ETF or a VIX short ETF. But that would be ideal.

    Any comments along these lines?

  2. AAA30


    By Tennille Tracy
    NEW YORK (Dow Jones)--There is a trade in the options market that's considered so risky that some brokerage firms have adopted special policies for investors who want to conduct it.

    TradeKing has forced investors to call the firm and speak with a professional before pulling the trigger on the trade. OptionsXpress Holdings (OXPS) has raised margin requirements for investors who want to do it.

    Despite these steps, many investors remain unaware of the risks surrounding the trade, which is known as a calendar spread on the VIX volatility index. And when the stock market collapsed last year, and the closely watched index hit previously unimaginable highs, some of them found out the hard way.

    Thinkorswim Group Inc. (SWIM), which is set to be acquired in coming months by TD Ameritrade Holding Corp. (AMTD), had to eatabout $2 million in trading-related costs in the fourth quarter after some of its clients conducted the trade and blew out. Now it, too, enforces a margin requirement.

    It's impossible to determine just how many investors have attempted to conduct a calendar spread on the VIX, or how often they do so. But with more investors showing an interest in trading options, it's likely that more will fall into the trap.

    "I think that most people who do this trade don't understand it," said Brian Overby, senior options strategist with TradeKing. "Because it just doesn't make any sense." ...........
  3. vxx vxz should do the trick
  4. Ah cool, so there are some VIX ETFs. Unfortunately you can't short them at Schwab. Lame.