hit @ 17 on nov. boy oh boy are people puking this today. who knows - maybe i'm just wrong way... we'll see on the # tomorrow.
i figure i'll add some of my thoughts about my position, and why i have it, as i would love to here differing opinions. This is a small account - i am using it to expierment/test theories/learn more about trading in vol. position: i'm long a whole bunch of vol in the front of the curve, specifically nov. reasoning: the premium of the future relative to spot is small for the # bus days to settlement compared to where it has been recently. (if you have some analytics that you think show otherwise please share) ~25bp many events are on the horizon (election, fiscal cliff, euro) and while they may be priced in, we are still talking about a current 17 handle and we are coming out of an extremely low realized vol environment with expected reenforcement by the bernanke/ecb protection agency that i believe has encouraged many to be more willing to be short implides than to be long it (and i believe that is what the small spread between spot and front month is reflecting). the spread between short term realized vol and the front month contract is low relative to the rest of the year. i am trying to figure out an efficient way to look at this to reflect # of bus days until contract settlement, if anyone has any ideas please let me know.
all your points make sense. the thing with vix curve trading is that although the expected gains imo come far more often than other types of trading..you may have to wait longer than a trader mentality would prefer. and the long vol at the front end is nice but i would prefer to have it in a fly than straight up long nov...i guess if you have a massive amount of short vol in back it may be a decent idea with the long nov.
I generally don't trade vix flies anymore but when I did and i didnt want to speculate on market direction i would ratio them to neutralize their modeled sensitivity to a change in vol[SP] or a curve shift. Your front outright is essentially an inverse ES. To earn you need to be very good at calling ES direction in which case easier to just trade the ES unless there's a notable convergence edge to lean on.
Ratio meaning -1/+2/-1 sequence.... Or are you talking +1/-2 kinda thing. Do you ever go short the front month calender.. (+1/-1) if you think that vol is to low and the curve is to linear or flat.
for my spread/fly historical analysis i look @ closing values for the contracts, but from my observations i'm not sure those levels are even executable. how do those of you who trade in these typically adjust for this? if a live chat is easier we can speak on bloomie or gchat or something, let me know.