mahkoh
1,065 posts
msg #131006
- Ignore mahkoh |
9/9/2016 12:48:19 PM
Now here's something I do not quite understand: VIX Nov 10 calls bid/ask were at 7.10 / 7.30 at the close yesterday with a delta of 0.998. The index is now trading $2.80 higher so one would expect the calls to be at least somewhere near $9.50 . Well, not so much.Bid ask is 7.90 / 8.10 , delta at 0.994.
The Sept 20 $10 calls: Yesterday 3.20 / 3.40, currently 5.00 / 5.20 with delta 0.998. Not by far the move we see in the index, but much better than the Nov expiration.
I was always under the assumption that an option at 1 delta would move 1 on 1 with the underlying, but apparently that is not the case?
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gmg733
788 posts
msg #131026
- Ignore gmg733
modified |
9/9/2016 3:28:01 PM
@mahkoh
Your answer lies in the greeks and the black-scholes model. The closer date options will have more gamma the closer to expiration you get than options that are longer dates ones. Vega is also naturally higher on longer dated options.
If you had all your greeks from yesterday and then from today you'd find your answer. While delta typically is a representation of price in terms of a move of the underlying, there are other forces at play like theta, gamma and vega.
Most options traders trade volatility (not necessarily in terms of VIX per se) but in the underlying. In your case the underlying is well volatility. :)
@Kevin
Nice trade regardless. I fell victim to the same issue this morning. I had a PAINFUL IWM short call trade going from August and took today;s relief as a means to get out. I left $1000 on the table. But I have plenty of short deltas left if this continues for a few days. Would like to see two more days of down days to book some more profits. Then I'll be looking into a SVXY long trade depending how the market holds up. OpEx week next week so I'm looking for a pop and a drop in vol.
Trade well all!
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mahkoh
1,065 posts
msg #131032
- Ignore mahkoh |
9/9/2016 6:28:39 PM
Thanks, gmg. Probably the greeks are involved, but I'm sure I was overlooking the elephant in the room: The insane premium involved with these options. 70 % extrinsic value for an option that is 15 % in the money..
Compare this to for example CVX, at $101. The 15 % in the money Oct 85 strike calls trade for $ 17.00, resulting in 5 % extrinsic value.
Kevin, you could use the symbol function to generate signals from ^VIX and run the multisystem against a sector that is made up of XIV and VXX to see how that compares to the original?
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shillllihs
6,101 posts
msg #131034
- Ignore shillllihs |
9/9/2016 6:39:05 PM
Or just create a system based on Xiv/Tvix all my plays are based off of using Tvix as a model.
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compound_gains
225 posts
msg #131036
- Ignore compound_gains |
9/9/2016 8:12:32 PM
Churn is the curse of options, as it has been for the past 40 odd days with SPY and VIX.
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Kevin_in_GA
4,599 posts
msg #131038
- Ignore Kevin_in_GA |
9/9/2016 9:11:59 PM
SIGNAL UPDATES FOR MONDAY (9/12/16) AT THE OPEN:
A NEW SHORT SELL SIGNAL has been triggered from VIX SHORT FILTER #4
THE 2 LONG POSITIONS FROM VIX LONG SIGNAL #1 and VIX LONG SIGNAL #2 ARE TO BE SOLD AT THE OPEN ON MONDAY (up 40.9% and 39.78% respectively).
These are the first signals to be closed - I will track the performance of all trades (open and closed) as we move forward to keep things honest. Just the usual reminder that these signals and results are for the ^VIX - you need to trade this based on what is most comfortable for you (VXX/XIV, options, futures).
THE CURRENT SHORT POSITION ENTERED ON 9/9/16 FROM VIX SHORT FILTER #2 CONTINUES TO BE HELD (down 39.78%)
That means on Monday all open positions will be shorting the ^VIX.
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mahkoh
1,065 posts
msg #131053
- Ignore mahkoh |
9/10/2016 4:27:30 AM
Many times in the past VIX spikes were capped halfway between the recent high and low. If this is to happen again this one should top out around 19.
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pthomas215
1,251 posts
msg #131070
- Ignore pthomas215 |
9/11/2016 12:23:17 PM
From a Money Morning article today....
""Whether Friday's sell-off is the end of the unprecedented period of low volatility they we saw this summer remains to be seen.The VIX popped five points (40%) yesterday to 17.50 but is still below its long-term average of 19 or so.""
Manoh, it appears you are correct on that 19 number for the VIX.
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gmg733
788 posts
msg #131075
- Ignore gmg733 |
9/11/2016 2:23:06 PM
Learned an interesting fact about presidential (and this year I use that term loosely) is in the past 17 elections the market has been down a minimum of 5% prior to November and on average 11%. I don't know if the 11% took into account the 2008 outlier move or not. Nonetheless, always good to try and maintain a little short delta. Most of these moves last 5-7 weeks.
I hope vix does not go back to the teens. What a lot of folks don't realize is no one really makes money when vol is so low. When we have healthy vol everyone long or short and make some bucks.
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shillllihs
6,101 posts
msg #131113
- Ignore shillllihs |
9/12/2016 2:11:00 PM
Good system. Did you pull the trigger?
What are the current signals?
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