What gills is looking for is convergence of his short vol in his book while banking Dec vix not dropping any more. Dec Jan as a stand alone trade taken right now I would not do at this time to expiration but in the context of a deeper book then fine...and he does not need a selloff to earn. If the market sells he can lose more on the short vol book if not setup properly or he can earn..screentime and experience are key. I have seen countless guys fail here. Its such an art and far from intuitive though. Gills, I do like your explanations of what got you in the trade...but if I were you I'd make a plan for December to January cycle.
yes - i essentially moved what was short jan feb spread to the dec jan spread, it will only last a few days, but i think it has the potential to make some money as well. all in all i am long dec, short jan, short feb, long mar.
Dude, I understand it. He can consider it a hedge against long the deferred, but that's not the point. He was talking short dec/jan and made no contextual comment until we asked why, and then it's, "Oh I am long the back month." Regardless, don't argue for the merits of a spread while ignoring the rest of it. We're not mind-readers. And I don't think the back long will make up for this dec/jan unless he 's 2-3x ratio'ed and/or we drop SPX here, but I don't spread futures much with vol in the bottom decile. Cash may tick to 13.00, but IMWO there isn't a lot of risk in short dec/jan. Ask Rally, he doesn't like it.
no - but i dont want to get into what the exact ratios are, but it isnt 1:1 also, i am arguing for the merits of the spread because i think its a good (although volatile) trade.
simmer down "dude" its ok...i would not say gills intentionally mislead us ...plus i'm sure he will detail how he did next week. i love rally more than most; but i have to say being my own man i'm long dec vol pretty big (and that was well before his post!) despite his reservations.
I am not questioning his veracity. He didn't talk about the back months until later. I agree with gills that there may be some residual vol leading into the Fed; cash traders refusing to mark to theta and thereby ramping up vol in the wings on the cash calc.
who know how far $vix can drop. we have seen below 12 a few times earlier this year. there can be multiple fed speaks b/w now and FOMC to gradually prepare the mkt for the (lack of) dec taper. front does not behave well this close to expiration. while there is not much of anything else going on, i would not push it with front.
Interesting conversation here. Only thing I'm doing in Dec now that has any value at all is selling puts: I have ten 15/14 Dec put spreads sold. Not looking good right now, but if VIX moves up on angst over the Fed stmt it might do something for me. Else, long Jan, short Feb & Mar (which I consider the 3rd month now), long Apr. Generally speaking, long the front into expiration via some sort of options spread has made money so far this year, as the Fed winds up taking action on precisely the day of expiration, which means the SOQ that morning winds up being higher, usually, than wherever spot closes the night before, I'm sure because people feel the need to hedge that event. It's almost a regular moneymaker. I might do some sort of call spread on VIX the day before on a lark, as unless VIX moves up a lot before next Wed those sold put spreads aren't going to do me any good.