Vol Whisperer: You’re So VIXed—VIX Futures, VIX Options

Vix or options trading, the bottom...

Diversification Traders have found the VIX very useful in trading, but now it provides superb opportunities for both hedging and speculation.

VIX Options Trader Just Made $,, | The Options Bro

There are various levels of option trading available e. In general, the same sort of restrictions e. For Dummies Dec. I am not receiving compensation for it other than from Seeking Alpha. One method detailed in my previous article, linked above, involved selling near term naked PUTS when the VIX reached some level, specifically 15 or below.

It is almost always on a Wednesday.

Trading Options On VIX: For Dummies

The option greeks for VIX options e. I buy and sell options on VIX. The first VIX quote of the day is usually at least a minute after opening. At the end of March, open interest already stood at a very healthycontracts. In other words, if you own 10 stocks and they tend to move together, then you really aren't diversified at all.

Mix ’n’ Match

Want to share your opinion on this article? The only time the VIX options and VIX are guaranteed to sort-of match is on the morning of expiration—and even then they can be different by a couple of percent.

Submit your own. Most of the time the outcome is profit, but no guarantees. A big VIX spike will be underrepresented, and likewise, a big drop probably will not be closely tracked. In February ofthe volume price action ea forex factory options averaged aboveOn average, VIX has risen It could have very well been Nassim Taleb betting that the market was underestimating a black-swan type of event.

The bid-ask spreads on VIX options tend to be wide.

Thirteen Things You Should Know About Trading VIX options | Six Figure Investing

For all of March - trading and liquidity strategy first full month of trading for VIX options - total volume wascontracts, with an average daily volume of 7, In this article, we take a look at the past performance of the VIX and discuss the advantages offered by the VIX options.

Most likely, an institutional investor purchased these options as a hedge to a large long-stock portfolio, but there is no definitive way to tell. I wrote this article myself, and it expresses my own opinions. Normally, I would advise against trying to "trade" them for profit.

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On Feb. I have no business relationship with any company whose stock is mentioned in this article. What Is the VIX? Reel Ken Reel Ken Medium-term horizon, long-term horizon, investment supply chain manager work from home Writing articles on various option strategies requires a broad knowledge of how options work, and volatility is one of the main components. However, this is still higher than most stock options out there.

Because of its tendency to move significantly higher during periods of market fear and uncertainty, another name for the VIX is the "fear index. For advanced options traders, it is possible to incorporate many different advanced strategies, such as bull call spreadsbutterfly spreadsand many more, by using VIX options.

However, the VIX is not like other traded instruments. With a normal option, you could expect the February option to increase in value, but because of VIX option "strangeness," this may not hold true. On the other hand, the VIX has spiked upward to around 80 when the SPX has dropped, but for the VIX to stay there would mean that the market expectation was for very large changes over an extended time frame.

VIX options are "strange" when compared to stock options.

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As a result, VIX options will often have lower IVs for longer-term options—not something you see often with equities. The CBOE combines the price of multiple options and derives an aggregate value of volatility, which the index tracks.

More on that later.

Vol Whisperer: You’re So VIXed—VIX Futures, VIX Options- Ticker Tape

This expansion allows for a more accurate view of investors' expectations on future market volatility. Total cost is a debit of 10 cents. If VIX never exceeds 15, you may have lost a little depending on premiumsbut when VIX eventually exceeds 15 practically a guarantee, given the environmentthen you will have collected on your "insurance.

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This equalization doesn't exist with normal options, but as I said, VIX options are "strange. It is very frustrating to predict the behavior supply chain manager work from home the market, and not be able to cash in on it. The VIX options are European exercise. This type of hedging can be in the form of VIX futures or VIX options; in this case, if this trade was indeed a hedge, the mysterious trader elected to use VIX options.

Most option traders rely heavily on volatility information to choose their trades.

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Values below 15 ordinarily correspond to less stressful, or even complacent, times in the markets. The following chart from the CBOE shows the typical relationship.

That, ladies and gentlemen, is a very impressive ROI, especially given only 13 market days passed. No special permissions are required from your broker for VIX options.

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First, one needs to recognize that though VIX generally goes down on a market rise and up on a market drop, it doesn't always follow that pattern. Follow Reel Ken and get email alerts Your feedback matters to us! Conversely, a trader who believes that market volatility will decrease can profit by purchasing VIX put options.

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Regarding VIX options: