The vola of the VIX is very high. In addition the volume is daily volume picking up. The mean IV is 73.8% IV Call 16 June is 91.7% ! IV Put 13 June is 54.3% I comparision DIA 10.2% SPX 13.2% Qs 15.6% IWM 19.7% AAPL 27.4% http://www.ivolatility.com/options.j?ticker=vix&R=0
The VIX future is not yet very liquid. I am thinking to use the future as a protection against upmoves. But at the moment a stop loss in the call might be better...
Yesterday I decided to write another 2 Call options. VIX JUN07 17 C (100) 2007-05-17 -2 0.6500 Received Money $130.00 -$1.50 commission ----------------------------------------------------------------------------- 05/17/07 Settlement values C17/6 -128.06 C16/6 -153.05 P13/6 - 88.67 Total -369.78 Requested margin is 1022.04 VIX June future 14.16 VIX Cash 13.51; Diff. 0.65 points Expiration date 06/20/07. VIX Cash and VIX Settlement price can differ 0.8 - 1.2 points. VIX Cash index is just an indication of possible settlement. That's what I read today on the CBOE website. http://www.cboe.com/micro/vix/VIXoptionsFAQ.aspx
Attached graphics shows how the VIX vola (historical 30 days and implied) has chanced over a year. Upper band 125+ Lower band 75- Interesting to see is also the pick up in volume. VIX options are very good tradable in my experience (other than VIX futures, yet).
Trading the "volatility of volatility" is a very poetic sight. A method would be really interesting here. Because reproducible! http://www.cboe.com/micro/vix/VIXoptionsFAQ.aspx#3 http://www.cboe.com/micro/vix/vixfuturesprices.aspx Votes at : http://www.elitetrader.com/vb/showthread.php?s=&threadid=93543
artes The method for me is to write options on VIX with the best expected performance to expiration and positive account management. The system is to write Puts every month and compound the gains. In addition I decided to write Calls every month and compound the gains. Since the VIX option market becomes so liquid I will put on stops on my positions as well. The tactics is to see if the high vola can be used in intra-day trading decisions as well. For example for the Qs the first hour vola is priced higher into the options and they get cheaper during the day. Backtesting has to prove that. I think that backtesting has to be done by everyone personnally. Just grab a spreadsheet and play with historical values. Another important thing is position sizing and money management - as we all know. Finally there is no way around to act. Writing 1 put cost me about $250 margin (depends on broker) and I've got some gain so far.
Attached I've posted a sheet to show how I evaluate VIX puts. From that analysis (for me) the VIX Put July 13 seems to be attractive.
Attached my analysis for the VIX calls. For me the Call July 16 looks attractive to be sold with a stop in place. C 16/7 1.35 possible stop loss 2.50 (depending on individual setting) Example for selling 1 contract: Get $135 by selling (before commission) Pay $250 (if no slippage, gaps, etc.) Loss $115 (min. after stopped out) Win if VIX stays below 16 at expiration and stop loss is not hit is $135 (minus commission). For taking no more than 2% risk per position on your account size your account size should be $5.750.