I have been developping strategies to take advantage of movements in the IV . The idea is to create a strategy which is solely exposed to vega. This thread was created to exchange and discuss about this family of strategies ( IV play). The idea behind my strategy is to neutralize all the other greeks to keep only a vega exposure. If anyone has ever work on this type of strategy or is using them, discussion is more than welcome. cheers.
Took a look at it. nice book, very general though I had more in mind discussions about the skew , iv structure and their effect son an assumed sound strategy. Thats more the type of discussions I wanted to have, not general discussions on general startegies which each have zillions of variants. Cheers
use them both. futures can sell at a premium (which means theta) options can be used to protect against drastic moves of the vix. thats why i'd like to exchange on that subject ( options)
Damir you trade calendar spreads on the vix futures don't you? Short front month/ long second month ? risk with that position is a swing up of the vix. How would you hedge against that? one way would be to purchase OTM calls on the vix futures. Unfortunatly they dont exist yet. so one way would be to try to synthesize "kind of the vix" through positions on spx options which would not require dynamic reajustement ( which is too expensive). That is the purpose of this thread: Synthezise the vix ( maybe not perfectly) but at a low cost. any ideas. all ideas are more than welcome
Good thread vixpill There is a way to replicate the vix with options. It is possible to isolate the vega and be neutral theta, gamma and delta. But, the question was what for trading synthecaly the vix since we have the futures. It gives you the possibility to trade the vix future spot !! That gives you a lot of possibility. You can hedge your position with it since the spot moves a lot faster than the futures.
Vixpills...why spend so much time and energy trying to create such a position with options now that VIX futures are being traded. Yes, I agree there is some level of time decay when the contract is trading at such a premium to the "spot" but is it really any greater than the theta one would incur in creating a spread to get pure vega exposure. Also, the transaction costs of creating such a spread would be much greater than just trading the futures contract.
no. tried with play money, but that trade just doesn't suit me. i just can't be short volatility, it's not in my nature. and a man's got to know his limitations, lol. now that we've seen the "pushing up on a string with a stick" nature of this beast, i'm staying in the long-only camp. go long on 20-day low, dump it on 20-day high and use some spare change to replace it with a fire and forget put ratio spread in case things really go to sh-t.