dtatu
143 posts
msg #131654
- Ignore dtatu
modified |
10/1/2016 10:07:53 AM
I think I'll start tracking your signals and trade, as I explained, for a while, on paper, the Futures spreads F1-F2 ,( I'll use only 1 contract in the beginning) using the official open of both to calculate the spread, and let you know, guys, about the results.
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gmg733
788 posts
msg #131655
- Ignore gmg733
modified |
10/1/2016 11:48:14 AM
@dtatu
Vix is based upon Spx volatility of index options.
I've been looking at this surrogate issue a little bit and I think I have a solution, potentially.
Before I get into it I preface the conversation with this. I've been selling call spreads on Vxx for several weeks based upon the notion of drag and its affect. Simply put it is a profitable strategy and you get a higher probability of profit if Vix pops above 20. Simply put I was working on this prior to this thread based upon an idea I got from a post on slopeofhope.com
Now, before I lay this out I wanna be clear this is the way I trade. I don't want to get into all the details but I trade options a certain way and make money doing it.
First thing to note and realize is Vix options have European settlement. If you do not know what that means do not trade options. I'm not being a prick but know the instrument you are trading. In short they trade like American options but settle like European. So no risk of assignment. Check! For Vix short signals, sell an ITM call spread where the sell is deeper in the money and the buy is at the money. For Vix long signals, sell a deep in the money put and buy an at the money put. Why? Great question. For defined risk trades it is less about volatility mean reversion and more about a direction play. In this case selling a put spread is bullish and your hoping the Vix pops or goes up. Inversely, you sell the call spread if you feel volatility will drop or mean revert. In short, it becomes a delta trade with the benefit of theta not hitting you over the head. What scares me is the put spread. Collapsing vol in the call spread will help this trade. But I have not figured out just yet what expanding vol will do to the put spread. My hypothesis is it will be more of a delta trade.
I have not traded Vix option this way yet. I'm trying to ascertain the best way to paper trade it. Right now I'm thinking of a risk one to make one risk/reward ratio. More work to be done here on my end.
Dissenting opinions are welcome.
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shillllihs
6,101 posts
msg #131656
- Ignore shillllihs |
10/1/2016 12:07:41 PM
Just looked at the results since July 29 and unless I'm wrong, Xiv has won every time
when going short Vix, but Tvix/Vxx does not do as well on long signals. So I would keep
Xiv for short Vix for sure. Maybe a system where you stay out of market when
you think there is a pullback or an allin when Vix is short. This could all be
because Vix is in contango so the trend is up. Maybe don't mess with long
Vix.
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ericeira
23 posts
msg #131657
- Ignore ericeira |
10/1/2016 12:13:47 PM
This is also what i got from SS long VIX for 10/3/16
Side Action OrderType Product Symbol BuyDate BuyPrice GainLoss SystemName
Long Buy Market Stock ^VIX VIX LONG SIGNAL #9
Long Hold Stock ^VIX 9/28/2016 12.9 3.02% VIX LONG SIGNAL #3
Long Hold Stock ^VIX 9/27/2016 13.36 -0.52% VIX LONG Signal #2
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pthomas215
1,251 posts
msg #131658
- Ignore pthomas215 |
10/1/2016 12:16:41 PM
shillihs, thoughts on performance with shorting XIV upon a long vix signal?
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shillllihs
6,101 posts
msg #131659
- Ignore shillllihs
modified |
10/1/2016 12:18:54 PM
Tried Shorting Xiv, won't work.
But knowing when the pullback will occur in Xiv is like the chicken and the egg. If you can't mirror Vix through Vxx.
How can you have any pudding if you don't eat your meat?
In general shorting a long instrument is safer than shorting Tvix or the sort. Mass exuberance will not hurt
you like mass hysteria.
I understand the idea is to find an instrument that tracks Vix, but just pointing out that Xiv does a fine job more or less, and Vxx/Tvix does a poor job.
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shillllihs
6,101 posts
msg #131660
- Ignore shillllihs |
10/1/2016 12:42:00 PM
Here's your final solution. Only play Vix short signals through Xiv with 75-100%.
And if you get future short signals while Xiv is below its recent highs, play 100-200%
Just double up. You are in contango. Thanx.
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pthomas215
1,251 posts
msg #131661
- Ignore pthomas215 |
10/1/2016 1:37:40 PM
I do like that solution. I just wonder how much the SS algorithm is being effected by the FED propping the market up for the election. If VIX long timing were perfect, I wouldnt bring it up.
Think about it in theory...XIV doesnt seem to be effected. only time the timing is off is when volatility is going to increase...that is exactly when the billionaire's boys club would step in to manage the market upwards. just spitballing...thinking Kevin's system may have better timing that it seems...1 month before the election.
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dtatu
143 posts
msg #131662
- Ignore dtatu
modified |
10/1/2016 1:43:59 PM
@gmg733
following your suggestion:
example for Oct 18 Options ( let's take a 5 points spread)
Sell 11call at 4.70
Buy 16call(ATM) at 1.2
Credit 3.5 ( risk is 1.5/5= 30%) at 16 on exp.
The problem I have with this spread is:
1. buying ATM calls , which means I pay 100% time value ( I hate this, as Theta is horribly against me)
2. buying a much more expensive call than I sell !( implied vol of 11 call=around 65% whereas Imp vol of 16 call is 91% ! )
3. The probability of this spread making money( being below 14.5 ( break even point) at the exp) , according to the quotes is only 28 %( delta of 14.5put with VIX Oct contract at 16 , today).
All these, tell me that the odds of a favorable outcome of this spread are not so good, imho.
Did I make a mistake somewhere?
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Kevin_in_GA
4,599 posts
msg #131663
- Ignore Kevin_in_GA |
10/1/2016 1:54:19 PM
I just wonder how much the SS algorithm is being effected by the FED propping the market up for the election.
@pthomas: These filters were based on VIX data from 9/1/2011 through 9/1/2016 - they are not based on any Fed theory regarding the upcoming election.
I am sharing this system and information freely to everyone - however, if this thread even begins to smell of politics I will terminate it. Save the political discourse and conspiracy theories for other forums, as they do not belong here.
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