Sorry if I was confusing-- I sold the straddle, so I should have just called it a strangle, and I had to edit that previous post a few times to get the 3rd grade math correct.
Ok, let me get this vertical spread +12/-13 result correct: -13: no payoff +12: +0.36 to me total purchase cost: 0.80 Thusly, my loss is 0.36 - 0.80 = -0.44 (size 5 = -$220)
On the morning of VIX expiration, everyone (customers, marketmakers, firms) can participate equally in the following months SPX option opening. The opening prices of these options are used to "set" the VIX settlement price. Indications are listed at the previous page I posted. There are usually very large orders in the SPX that are used to "massage" the VIX print. Not sure if it is large customers simply rolling postions or not. For example today there were large sell orders in the options, thus a lower VIX print. The opportunity is to essentially be able to buy or sell an option with edge. For example today you could see that there were large amounts of puts and calls offered. One play with the least risk is to buy the out of the money puts for .05 for knowing that yesterday the strike 100 points lower were .05 bid, then sell the options just after the opening for .10 or .15. Other more aggresive plays could be done with meatier options.
OK so you look at the offers before the open then buy / sell based on that? So if there is heavy liquidity on the bid you buy it up then sell after the open? If I got it right? And if there's lot of liquidity on the ask you sell it?
Basically yes. You will see in real time that there are say 4000 1600 puts to sell and what price they will open at. The price they will open will constantly be changing based on the amount of bids out there. If it looks like the price is really cheap, you would join the bid. Take a look at the HOSS site next month and you will get a feel of what is happening.
What a print! 15.45 preliminary from last night close of 14.25. FSU, I hope you werent short straddles this time around
15.47 Final. I thought premium was way too cheap. I had the 15/16/17 call butter on. They were actually selling this at .04, unbelievably cheap. Also had the 15/16 call spread vs short the 16 vix binary calls. These are great to trade if there is ever any real bids or offers (which they rarely are). So it worked out well this month. I did have the 14/13 put 1x2 (.05 debit) on for a shot on a downside print, so I did lose on this side. The real opportunity was the Hoss opening today tied to the VIX settlement. March SPX out of the money calls and puts opened extremely high.
Vix premium seems cheap going into settlement tomorrow. I am long the 15 puts for .10 and the 16 calls for .20 Seems like a good play for tomorrow morning.