VIX fly / spread journal

It works untill it doesn't.. Have you seen what your book will look like going through a 2008 or even 2011? were you trading then

 

Not this way. My logic, such as it is, is that the front moves more, so it's a decent hedge. Did a ton of empirical research, and what emerged is that, for whatever reason (actually I think I have the reason down, but that's another story entirely), the third month provides a reasonably steady return. Front month is exponentially more volatile, so I figured that'll do as the hedge. Actual experience has varied some from that logic and the proportions of buying & selling I was using, as I noted, so I have to do more work on the right proportions under differing conditions. It has been reasonably good to me so far though. Up this week despite the rise in the VIX, for instance, so that's something.

 

Well that's good.. any research is better then no research... I in the past always shot from the hip, and did all the quantitative studies after i lost money..

 

yes, if u have a book of long and short vol thats great..of course its an art to make it earn overall. good luck.

 

Thanks!

 

given that all spreads had continued lower except the jan/feb.. i added a jan/feb back on at 95 earlier this am.

 

update: short spread dec jan is 2.95

long spread jan feb is -1.25

this means the fly is 4.2 points apart.

now for the correction to original post pricing:

i quoted jan feb as ".25" on the trade start> it was really "-.25"

so original fly price was 3.35 "apart"

i am down marked on the fly by .85 cents

have not added. will update at end of next week. the move in jan futures i did not expect; although i expect the fly to flatten by expiration.

 

i sold dec/jan spread here (long dec, short jan)

i think with spot >= dec and little time to maturity + fomc on the horizon it has potential to earn some over the next week. i also am short vol elsewhere on the curve

 

isn't the fomc meeting dec 17-19.. isn't that after dec expiration?

 

minutes are out dec 18, day of expiry. the thesis is front end of vols will maintain a bid ahead of the announcement. im not going to hold it through expiry, i'll close it prior to.