Vix: covered call question

Discussion in 'Options' started by paysense, Dec 22, 2009.

  1. Been doing covered calls for over a decade, but don't inundate myself with "learning" a bunch of new trading stuff - when what I do *works*.

    But in this last 4-5 month environment - nothing seems to "work" (for me) very well.

    BUT, I noticed the Vix - with this <i>innocuous</i> (now) end-of-year market is in the sub-20's:


    - to me it seems the unlikelihood that this will drop much from here. . .until Jan 2010 options expiry -- that the juicy CC (J 20) premium (3.20) and attractive bid-ask spread (.20),

    makes for a good covered call play. Mind you I know nothing about CC's on Vix, but maybe the return is as good as it looks to me???

    Furthermore a 20!!! put is going for pennies (.40) and we still have 4+ weeks until expiration.

    What am I missing?

  2. Maybe i`m just dim today? But how are you going to execute a covered call on a cash index? How are you long the underlying?
  3. 1) VIX options are priced off of their corresponding futures contracts, not the cash index. The options also have "goofy" expiration guidelines.
    2) Do a keyword search with "VIX" in this forum for more info.
    3) Would you be willing to trade naked short-puts instead of covered-calls? :confused:
  4. Sure - it just seems there is a difference in premiums based on the Vix price between the 20 put and the 20 call - I'm not familiar with seeing when looking at stock prices and their calls and puts.

    Perhaps a spread of sorts selling one and buying the other?

    What are these prices telling?p$
  5. The November lows on the daily VIX chart need to be re-tested? We'll see. :cool:
  6. So there is no underlying that can go point-for-point by expiration - in the event the vix jumps - with the call -- to capitalize on the $3+ time premium?

    Perhaps sell the near call strike and buy the WOTM call strike?

    I dunno.p$
  7. 1) the jan vix futures closed at 22.65... so your jan call currently is in the money by 2,65$... So thats your first problem

    2) the vix future is cash settle with a size of 1000. That means 22.65*1000=22650$. The vix options are set at 100, so you need 10 vix options to equal 1 vix future.

    IMO you do not have the knowledge to start playing with the vix. I don't mean to insult you but you would be better of doing your homework first
  8. paysense, in case it's not yet clear:

    The January VIX options are based on the price of the January VIX futures, VXF0. The options are not based on the VIX index. The futures vaguely follow the VIX index, but can be higher or lower because they are contracts on what the VIX index will be on January 19, 2010. Do not attempt to trade VIX January options unless you are aware of the price for VXF0.
  9. Sell cash-secured puts, buy ITM PS
  10. drcha


    you may wish to take a look at the ETN VXX
    #10     Dec 27, 2009