actually what i traded is a vix futures fly. the position is +1x aug/ -2x sep / +1 oct i hope that your prediction of the new range is correct, but this could all just be FOMC bids.. we'll see
I am somewhat new to trading VIX options and futures spreads. I don't find that fly attractive because the near month seems to drop in value much more than later months as expiration approaches. To take advantage of this, I have recently traded a calendar spread a few times. Short July and Long Aug at the top of the range, and the opposite at the bottom. These trades worked out well very quickly so it didn't matter, but I think it's a good 2nd way to make money with time. Of course, the far month in the fly holds its value better compared to the others so I guess that's why it works overall.
adding position to aug/sep spread. i think it should be between 15-25 given vol levels and the rest of the curve.. and if we get a move down again, even lower.
today was a really confusing day for me. given how much es was moving, i thought there would be a lot more action in the spreads, but they weren't moving much. i paid a bit away in comissions after not getting the moves i expected. how are others doing here?
there is a supply and demand issue you may be missing. they do not react fully correlated to spx or simply because spot moved down today. a day trader mentality does not serve well imo also. in any case with a higher floor in vol i see at the very least more opportunities..maybe not true intra day stuff (u would need 22-plus spot) but more dislocations in term structure may appear. screen time!!
the vols are creating new floors at higher levels with no exhaustive spikes that recede to lower levels.. The front of the curve is on the brink of inverting. We are ratcheting into a higher volatility environment. just a guess.
a few reason: 1) i was looking historically in 07, which was the only other time period i saw where we were reaching levels of spot vix 20 after having the entire curve be under 20 and it looked like the spreads were either inverted or flat for the 2nd/3rd months. 2) because of how inverted spot was to both jul and aug at the time of my post. 3) seeing that part of the curve go closer to 0 earlier in the year on lower vix moves (although maybe faster?) 4) the jul/aug was at 5, and the sep/oct was at 32. i didn't see why the front fly would be inverted, but the 2nd one not. if you disagree, can you tell me why you don't feel that way?
I think i've mentioned this before but you can't use 2007 as any type of comparison. Also, spread dynamics change a few times a year so going that far out will yield nothing worthwhile. The dynamics of the second fly are quite different than the front one. I don't see it inverting in any meaningful way unless we drop all the way to the 200 day MA on the SP in a straight shot. In which case you are better of just being long puts than being short a fly when the curve is nearly flat. Risk/reward is quite skewed against you. Easier money is on the short vol side here IMO.