VIX: What I Should Have Put My Money In
Instead of playing this quarter's earnings, I should have played the VIX!
How crazy is it that it's considered NORMAL to have a day where the market swings a hundred points! And then it feels weird when the DJIA moves 20. WHAT! But that is the reality that we are living in.
Best way to play the VIX: Sell/Write some calls or puts that are DEEP OUT-OF-THE MONEY. I mean even writing a put on the bluest of of blue chips, i.e. Proctor & Gamble, you can't be safe when the market freaks out and slides 900 points in a minute. I'm talking about the "fat finger" episode if that wasn't clear.
I just had an epiphany! They best way to play this market is DRUNK!






or you can just buy variance
or you can just buy variance swaps, put on a straddle, strangle or if you're more conservative reverse iron butterfly...
buying one way: calls or puts DEEP OTM isn't a very solid idea seeing how the market in the past quarter has been having some significant swings both ways
Ha yes, it didn't take long
Ha yes, it didn't take long for someone to suggest an option spread for this idea.
Nice.
Yours truly,
The Young Investor
Trades always seem a lot
Trades always seem a lot better when you are looking backwards.
Straddles suck btw, and strangles aren't much better. Too expensive.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
You want to WRITE CALLS on
You want to WRITE CALLS on the Vix? That would have killed you on May 6.
"buying one way: calls or puts DEEP OTM isn't a very solid idea seeing how the market in the past quarter has been having some significant swings both ways"
ambition - VIX should increase when the mkt goes up or down. A long call on VIX isn't a market directional bet
... but of course it's not
... but of course it's not symmetric.
Uhhh the flash crash wasn't @
Uhhh the flash crash wasn't @ expo for the VIX options and plenty of people short direction and gamma on the VIX were fine after things tided over.
Correct: Market direction is
Correct: Market direction is not tied to the VIX.
But, do you know how option's are priced? Looking at the Black-Scholes equation, the more volatility, the higher the option prices.
So think about it like this: When you play the VIX you can use options, when you use options you are subject to market movements. That's the connection.
Yours truly,
The Young Investor
volatility actually spikes
volatility actually spikes for market downturns and dips for market upturns
see: 1.
see:
1. http://www.indexindicators.com/charts/sp500-vs-vix...
2. http://www.google.com/url?sa=t&source=web&cd=1&ved...
ambition56: "volatility
ambition56:
"volatility actually spikes for market downturns and dips for market upturns"
-Yes, one can see a pattern in this.
But there is no way in hell that I'm going to be basing my trades solely on these patterns. So why not just set up a computer and do the trades with that premise. No thanks.
What typically happens is that a stock will reach a price in which in does not attract any more buyers so the vix will drop. But there are just to many circumstances where that doesn't apply.
Yours truly,
The Young Investor
It's not clear that you have
It's not clear that you have any idea what you're talking about. Please take your blog spam elsewhere.
most people use variance
most people use variance swaps to hedge market downturns
OK dabanobo, show me what you
OK dabanobo, show me what you got. Put me to shame. Give me a link to some things you've written.
Yours truly,
The Young Investor
Someone just ban this
Someone just ban this spammer, please.
Ha what?! Are you guys
Ha what?! Are you guys calling me the 'spammer'?
Yours truly,
The Young Investor
Ok, somebody was kind enough
"standard deviation is much
Warp: I understand exactly
Yours truly,
The Young Investor
pricing of VIX represents the