Systematic Identification of Volatility Mispricing

Discussion in 'Options' started by lcs, Oct 29, 2013.

  1. lcs

    lcs

    seeking help to resolve the following

    for example, using ITM VIX puts to short VIX futures

    pros
    1) limited downside on the way up
    2) if VIX spikes, some protection from vega pnl

    cons
    1) large bid ask spread
    2) loss from vega pnl, gain from delta if delta view is correct

    can offset the premium by selling further itm puts. on flip side, more legs => more commissions and spreads.

    Am i missing something? how do i really decide which makes more sense? strikes and sizing based on depth?

    many thanks in advance,
    lcs
     
    #11     Jan 13, 2014