Volatility is historically at low. I am planning to open a DD on RUT. Dec 830C/750P ( 1st std deviation 825 - 761) Jan 860C/720P ( 2nd Std deviation 858 - 731 ) for a debit of 1.70 Current price is 790 I will also open a put calendar at 750. for a debit of 5.25 to Please let me know your thoughts.
Are you using the same number of contracts for both the DD and the calendar? If so, you're betting heavily on RUT being near 750 and the call side of the DD doesn't help you much. Others might prop up the saggy bottom in the middle of your DD with a calendar or diagonal at a smaller size than the DD. VXN today is 15.13%. It's been as high as 26%, but I might model it at 15% - 18%. The VIX is closer to its lowest low than the VXN is. And the ratio of highest VIX to VIX today (which I view as the vega opportunity) is higher than the corresponding VXN ratio. So I've been trying to put long vega positions on the SPX instead of the RUT. My 2 cents.
Leon, Yep. The VXN is the Nasdaq IV index. I'm using it as a proxy for the RUT IV. I was just making the point that it might be more favorable to use an SPX/OEX underlying (Vix being the IV index for S&P100).