VIX futures trade, how is the risk reward

Discussion in 'Options' started by optionnew, Aug 30, 2011.

  1. I have put in a trade for a VIX futures spread last Friday. Bought 3 March 2012 futures for 29.88, sold Feb 2012 futures for 29.70 for a total debit of 18¢ ($180) per contract.
    From what I have seen, the 7-8 month futures does not generally become very nagative even when the vix is extremly high & the whole term structure is in backwordation, however when the vix is in the 20s the 7-8 month spread would usually run at 60-70¢.
    So I bought the spread for 18¢, put in a sell order for 65¢ and also placed a stop loss if the spread turns negative 40¢.
    Should the spred stay in the current range, I would do a roll over in mid September to an April-march spread, in that scenario the roll cost would be low.
    Does the risk/reward of the trade look favorable?