What's your approach of going Long Volatility?

Discussion in 'Trading' started by shortie, Apr 28, 2011.

  1. Or are you shorting it?

    VIX ~4 year low, it should bounce up soon, right?

    Near-month VIX futures price in a decent reversal in volatility from the current level (e.g. May +15%, June +30%) so they may not be great vehicles to go Long volatility. My thinking is that June may actually be good one to go Short after we bounce up from here.
  2. Lucrum


    Either that or it will continue lower.
  3. the bounce up is very likely at this point as far as VIX goes. I don't know how much of it may translate into VIX Futs.

    i am guessing the big boys don't want to talk about their Long volatility positions because they are still scaling into them. Better hurry up, bros, the train is about to leave the station I believe.
  4. I tell my wife no more shopping! Volatility assured! :)
  5. it can as well go back to its 10-12 range at it has been pre-crash. For myself i am short to the tune of about 70 es deltas and heavily short vol (my platform shows about 1500 short vega). Not that i think it will go down but if it does my deltas will save me; short vol will save me if we melt up.

    So a weird position still betting vol will go up probably; using short vol.

    my bet is the market wont go too far in either direction for the next 4 months or so.
  6. VIX 17.72 high today up from 14.62!

    I hope you all made a killing on this jump.
  7. VIX 19.11 +30% jump 4 days after my call. I did not really expect this kind of action. Any long VIX call or Fut would have worked in this case.

    Does anybody employ some other generic method of going long volatility? Are you guys usually short volatility with occasional Long shots?
  8. When you see the market go down 200 points you buy. You buy because all your retail stocks are giving you love. When you reach the apex of the comeback and start to slide (-55 DOW) you sell. Then at the close you buy again for today.

    Seems to work real well.~ stoney
  9. Don't know what you mean by "generic", but look at the correlation between the VIX and a highly leveraged short fund:


    In the short-term, you can get quite a bit of the same performance out of it. IMHO, going long on the VIX is very similar to going short on the overall market. It does seem that the VIX moves more, percentage-wise, than even a highly leveraged short ETF, so I guess that would be a better play if you just wanted to short the market in general and were very sure of your convictions.

  10. Locutus


    Here's how you go long volatility/VIX:

    Sell 1x OTM call
    Buy 2x OTM call for same premium as sold call

    Do some tricks yourself to find out what the optimal spread is. You may even go short premium a bit to make it worthwhile if nothing at all happens.
    #10     May 6, 2011