Let's Trade Options | Page 675 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

BELLA SYSTEM. Let's try it, let's improve it! 118 replies

Let's Trade The News V 0.4 ! 479 replies

Any Options, Bull Options & Option Bit 39 replies

Let's Trade The News! 46 replies

Let a trade develop? 17 replies

Attachments: Let's Trade Options
Exit Attachments

Let's Trade Options

  • #13,481
  • Jun 18, 2016 11:57am Jun 18, 2016 11:57am
Quoting pmmebids
maybe uvxy 20/25 call , but then again the referendum might be dead (as you already think so) by early next week.
idk what will happen - my best guess is that the markets will go sideways all week....we might see ^VIX uptick some, but maybe not enough to raise VXX and UVXY much...it does not seem that smart money is betting on a brexit, because we have not seen much in the way of outflows, and equities even rallied a bit at the end of the week...the posh and the young in the UK will vote Bremain, but the young don't vote as much as the old do....so maybe there could be a surprise....I'm already heavily set up for that and now I am looking at trades to capitalize on a Bremain relief rally
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,482
  • Jun 18, 2016 12:09pm Jun 18, 2016 12:09pm
re: UVXY verts - bread n butter for me is try to fill them as close to the money as possible - rule of thumb is: the less time, the closer to the money - then generally I am looking for a bargain, <10c on a 50c spread will put you in 3-bag territory, maybe 4x if you get in cheap enough and catch a really big move. I don't necessarily look for 50c spreads, but I am watching the ratios - I want to be paying <20c on the $1 spread. If you shop around in the UVXY chains you can sometimes fill really good bargains....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,483
  • Jun 18, 2016 12:11pm Jun 18, 2016 12:11pm
...like as shown, would prolly try to fill it for 10c and take it off at 40c - you'll likely make money on this trade if UVXY moves north even a hair....I need easy trades that keep my balance green

Attached Image (click to enlarge)
Click to Enlarge Name: 2016-06-18_1004uvxy.png Size: 67 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,484
  • Jun 18, 2016 12:32pm Jun 18, 2016 12:32pm
iv in the UVXY options is already very stretched...it put on a huge move, from $9.35 to $16.75 in 6 td's....the end of that on 6/14 saw 120MM shares traded, the record....
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2016-06-18_1025uvxych.png Size: 112 KB
Click to Enlarge Name: 2016-06-18_1031uvcyc2.png Size: 70 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,485
  • Jun 18, 2016 12:46pm Jun 18, 2016 12:46pm
the 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....
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2016-06-18_1043uvxy7.png Size: 64 KB
Click to Enlarge Name: 2016-06-18_1044uvxy8.png Size: 66 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,486
  • Jun 18, 2016 8:12pm Jun 18, 2016 8:12pm
Quoting The Fool
I 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.
Agree with that 50+ spike as an anomaly, a once in a decade thing ... . Otherwise the VIX "top" tends to be at 30-ish and even that doesn't occur all that often.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,487
  • Jun 18, 2016 9:05pm Jun 18, 2016 9:05pm
Quoting The Fool
the 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}
A 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. Nevertheless, there's been a late to the game scramble here that has driven VIX to 20, where it basically appears to have temporarily topped out (last couple of days at end of last week). Now, any insurance that could sensibly be bought for a further shock to the market (e.g., at VIX 30, which I regard as the usual VIX extreme) is no longer cheap ... . It's .90 (looking at July VIX options). To go cheaper, you have to look at higher strikes and enhance the likelihood that you'll endure a repeat of the insurance you bought in May, a lot of which went on to expire totally worthless ... . My guess is some hedge funds are saying, "Um, let's ride this out here. We got our asses burned on that .50/contract long call insurance we bought last month that expired worthless; let's not do that again ... ."

Neverthless, on Friday, calls bought on ask exceeded those sold on bid by 53029 to 47872 contract (for 1.2 M net premium) and puts sold on bid exceeded those bought on ask 64100 to 81037 (for -2.8 M net premium). http://www.cboeoptionshub.com/2016/0...tions-613-617/ In other words, 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 ... ).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,488
  • Jun 18, 2016 9:23pm Jun 18, 2016 9:23pm
It's probably going to be this 20 handle wide sideways chop right up until the vote results are in, and those will not begin to be known until some time Thursday night here in the US:

Attached Image (click to enlarge)
Click to Enlarge Name: SPX500 4H.jpg Size: 419 KB


If for some reason, fear mounts as to the outcome leading into NY's Thursday close, we could see some last minute positioning in VIX/VIX derivatives late in the day. It seems like multiple polls showing multiple outcomes (i.e., neck and neck, leave ahead slight, remain ahead slight) come out daily, adding to the muddle ... . Which is good for long volatility, assuming that the muddle adds to the fear ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,489
  • Jun 18, 2016 10:31pm Jun 18, 2016 10:31pm
Quoting ZebraSquirl
A 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 ...
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...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,490
  • Jun 18, 2016 10:51pm Jun 18, 2016 10:51pm
Quoting The Fool
{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...
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").
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,491
  • Jun 18, 2016 10:55pm Jun 18, 2016 10:55pm
A post I did for people who think they have "bright ideas" in TradingView ... :

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 ... ).

Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,492
  • Jun 18, 2016 10:56pm Jun 18, 2016 10:56pm
I'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....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,493
  • Jun 18, 2016 11:05pm Jun 18, 2016 11:05pm
Quoting The Fool
I'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....
(Scratches head) ... . Now that you mention it, I haven't either ... . Lol.

What is with this 32k of volume in June VIX 30 calls; ginormous OI, also (400k)? (At this point here, I'm basically just mentally masturbating on stuff until I can wade back into premium selling setups post-Brexit ... . Annoying, how these binary events get in the way of my usual way of doin' bidness ... .) Guess I should embrace the wait as a break of sorts ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,494
  • Jun 18, 2016 11:20pm Jun 18, 2016 11:20pm
Quoting ZebraSquirl
{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").
Personally, I've always considered buying VIX calls an extremely stupid way to hedge longs or to protect them from a market downturn, particularly if they are far OTM (which is the only way you'll get that "insurance" cheaply), making them all the more likely to expire worthless. Selling calls against your position is a far better way of going about protecting your longs from downside than buying options that are likely to expire worthless ... .

That being said, I was talking to a fund manager about the reasons for their not selling calls; apparently, there is some regulatory compliance issue with the way he has his fund set up regarding selling options against a long position. I don't know if that's "standard fare" or if he's 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 ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,495
  • Jun 18, 2016 11:21pm Jun 18, 2016 11:21pm
Quoting The Fool
I am looking at SVXY rat now....
...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
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-06-18_2113svxy.png Size: 76 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,496
  • Jun 18, 2016 11:26pm Jun 18, 2016 11:26pm
Quoting ZebraSquirl
... 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 ... .
.....lol, under the radar for me...the only way to fly...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,497
  • Jun 18, 2016 11:29pm Jun 18, 2016 11:29pm
Quoting The Fool
{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}
Me likee ... . I'm gonna watch markets up to Brexit, see what vol does, and consider putting something like this on before, I dunno, Thursday close? I may go longer with the back month. Last time I put a similar setup on, it seems to have taken forever for the vol to come off, "forever" being beyond the expiry of my back month ... . Lol.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,498
  • Jun 19, 2016 12:00am Jun 19, 2016 12:00am
Non-VIX/VIX derivative plays to consider (assuming a Bremain vote)

1. GLD, GDX, or GDXJ short. XAUUSD is at/near 1300 resistance, and it will probably dip if there's a Bremain outcome. Short call verticals in GLD above current resistance levels.

2. TLT short/TBT long. TLT bearish assumption on Bremain; short call verts above the top. TBT (its inverse); short put verts below the bottom.

3. EFA long. It's already made a small recovery move to the upside, but short put verts below current swing low. The other Euro market ETF's suck (as if EFA doesn't suck enough) for options ... .

4. FXE short on retrace. I'm always short on retrace with this instrument, but the premium is hardly ever there, so I like to play it tighter than I would usually go to resistance levels to get some juice out of the spread. Look to short at EURUSD 1.14+ (higher obviously, better); frankly, I don't think the Euro will recover that far, but you never know ... .

5. Indices. I'm not hot on broad index plays. We could get a relief rally just on the fact that the vote's over, even if it's Brexit (tin foil hat time: I've seen weirder shit happen like oil, post-Doha ... ).

Out of all of these, I like a GLD (or GDX) the best, since it's at resistance ... . GLD/GDX and TLT have the best options liquidity; the rest, so-so ... . Out of those, GDX has had the highest IV, so it's likely to have more "premium juice" in it ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,499
  • Jun 19, 2016 12:43am Jun 19, 2016 12:43am
Quoting ZebraSquirl
Non-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... .
GLD or GDX, I'm with you.....I tried to enter a TLT put spread last week, missed by a copper or two.....EFA, I got in Jul 01/Jul 15 $58 call calendar for 12c......FXE, don't like it much.....indices, yes, IWM or SPY for me usually, I am shopping...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,500
  • Jun 19, 2016 12:48am Jun 19, 2016 12:48am
SVXY is pretty bad, but I will play it if it gives me decent fills.....if the calendars can fill low as shown I might stack some call cal sets $6 apart or so...
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-06-18_2246svxy3.png Size: 78 KB
"If The Fool persists in his Folly he will become wise." - William Blake
2 traders viewing now