What is your favorite long volatility play? - Maverick Trading

Discussion in 'Trading' started by mavericktrader, Aug 10, 2011.

  1. Hi Everyone,

    I am looking for some ideas for a better play on the VIX than a recent trade. Last May, I thought that volatility was extremely low and not likely to go higher. However, I also didn't know when volatility would go higher and didn't want to just be long VIX calls since I would get hit with Theta decay. I wanted to at least break even on the trade while I waited. I chose the VXX (short term futures on the VIX) but in hindsight the action of the $VIX was a better trade. Here is what I ended up doing. Basically a Diagonal calendar spread but ratioed to be more bullish.

    Long 50 Contracts of the 22 VXX September calls for 4.30
    Short 35 Contracts of the 25 VXX June calls for 1.50

    This left me with a debit of 2.80, a net delta of .34 and a .00 net theta. With it ratioed, it left me some upside potential for a spike in volatility which we recently got.

    In May, the VXX closed under 25 and the June calls expired worthless. I sold the June 24's and they expired worthless as well. The July calls I sold I bought back at expiration for a small gain and I sold the August 27 calls (which now I wish I didn't do). I ended up exiting the entire trade for a decent profit but was wondering if anyone could think of a better way to trade the VIX bullish without experiencing time decay or being long the stock.

    Thanks in Advance
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  2. Hey Maverick.

    Looked like you hit it on the head except you left a lot of money on the table. That of course is hindsight and everyone would be a rock star if we could trade off that. Well done and keep the posts coming.