Dislikedmaybe uvxy 20/25 call , but then again the referendum might be dead (as you already think so) by early next week.Ignored
"If The Fool persists in his Folly he will become wise." - William Blake
BELLA SYSTEM. Let's try it, let's improve it! 118 replies
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Dislikedmaybe uvxy 20/25 call , but then again the referendum might be dead (as you already think so) by early next week.Ignored
DislikedI think that Aug '15 ^vix spike has to be considered an extreme outlier, came on when the PBOC devalued the yuan unannounced...I just disregard that now in any measure of what the ^VIX might do, when I am assessing actual trades.Ignored
Dislikedthe more I look, the more I fear ^VIX already shot its wad & is set up for a massive iv crash on a Bremain, a revisit to low low levels in the following week.... {image} {image}Ignored
DislikedA savvy investor, hedge fund or whatevs would have bought its insurance cheap and early on the VIX dip to 13.50, positioning well in advance for the obvious binary events of FOMC and Brexit..............................the market is still still positioning net long volatility at these levels ... . Either they know something we don't or the market is dead ass wrong (not the first time that's happened ...Ignored
Disliked{quote}I heard that, you have to set up trades for the vol reversion BEFORE the vol spike.....practically, though, if you are just using ^vix derivatives to hedge long market positions anyway, there's no reason to be trading short vol with VIX, VXX, UVXY....which suggests those should always be weighing in somewhat net long - although I don't know if that is true...Ignored
A long straddle is a neutrally biased setup that is intended to take advantage of a large move in an underlying either to the put or call side and consists of an ATM long call and an ATM long put.
Given the fact that the market will either move up or down (potentially violently) in response to the outcome of the Brexit vote, you'd think that this would be an "ideal" setup for this type of binary event ... . But is it?
Let's look at the metrics of an example setup: a July 8th SPY 206 Long Straddle:
Probability of Profit: 46%
Max Profit: Undefined
Max Loss/Buying Power Effect: $694
Breakevens: 199.06/212.94
In short, you lose money on the setup if price stays between 199.06 and 212.94 and max loss occurs if price stays within the break evens at expiration. Conversely, you only make money on the setup if price goes above 213 (basically) or below 199. Not looking so hot now, is it?
In comparison, a 1 standard deviation long strangle, although cheaper to put on, has an even lower probability of profit and worse break even metrics. For example, a July 8th 197/216 SPY long strangle has a probability of profit of a mere 26% and break evens of 196 and 217 ... . In short, I would pass on the long strangle/long straddle plays here; in fact, you should probably pass on them virtually all the time ... . They're low probability plays and require fairly epic movement either way to make money (statistically, they're the least successful options strategy out there ... ).
DislikedI've not made much $ trading "short vol" meself - although I have scored nice gains on SVXY spreads (flys) ... I am looking at SVXY rat now....Ignored
Disliked{quote} You're right there. Traditionally, "the playahs" have used VIX as an insurance policy long only; they aren't in those instruments to short vol, since they're trying to protect long positions, so it could be that this guy's stats are just the way things are generally -- skewed to the bullish side (he'd have to show me a whole bevvy of historic stuff as to whether the market really cares all that much or as much about short vol in comparison to "buying insurance").Ignored
Disliked... just an incredible retard who's not beating the market just like the vast majority of fund managers out there ... . I just jokingly told him that was the stupidest, most capital inefficient way of doing things I've ever heard of ... . He shrugged his shoulders and said, "Well, I get paid either way ... ." I don't talk to that guy much anymore ... .Ignored
Disliked{quote}...for the week after Brexit week, to catch a vol collapse....look at the SVXY weekly chart & see bigger green candles at $6 or so....if I can fill for a nickel I will prolly put these on to hedge some of the big load of long vol trades I'm carrying.......P/L below modeled @ -20% iv {image}Ignored
DislikedNon-VIX/VIX derivative plays to consider (assuming a Bremain vote) 1. GLD, GDX, or GDXJ short. ...... 2. TLT short/TBT long. ......3. EFA long. ... . 4. FXE short on retrace. ... . 5. Indices......... Out of all of these, I like a GLD (or GDX) the best... .Ignored