iPath Series B S&P 500 VIX Short-Term Futures ETNArca
Beschreibung
⋅
With VIX hovering around 2019 lows, re-upping with another "Zebra" ... .
Metrics:
Max Profit: Undefined Max Loss: 221/setup Break Even: 15.23 Delta/Theta: 85.16/-1.07
Notes: There are several different ways to look at this trade: (a) as a long call vertical + an additional long call; (b) long calls, the cost of which is cut by selling a short against; or (c) a synthetic long stock position (at least on setup, since its delta is dynamic). In any event, looking for a pop between now and expiry. Take profit on these is subjective, since it's awfully hard to tell when VIX has topped out and max profit in the setup is "theoretically infinite" due to the additional long call present in the spread.
Kommentar
⋅
As a possible take profit target: although VXX doesn't quite move as VIX does, you can use VIX as a rough guide. With VIX trading at 12, a pop to 16 isn't out of the question, which would be a 33% pop or so from here. VXX is currently trading at 15.09, so a 33% pop would be to VXX 20 or so or about 5 strikes worth of movement. With the extra long call currently having a delta of 70, a 5 strike move should be greater than $350 worth of movement given the fact that the delta of the long will increase as it becomes more monied.
Trade wurde manuell geschlossen
⋅
This may go further, but taking profit here ... . Closing for a 2.56 credit; .35 profit.
I always enjoy your posts and don't always have time to reply..... I want to throw this idea at you to get your thoughts and it's not a critique so much as it is picking your brain I know it's after hours right now and I'm looking at the same trade and obviously have the benefit of hindsight and a static market ..... Would executing this trade with 66dte Feb21 for a 2.67 debit not only give double the time to play for the Vol Expansion we are betting on for only an extra $42 but also having calls with more extrinsic value benefit from an increase in Implied Volatility if that were to occur? Would love to hear thoughts Mr. Naughty Thanks in advance :)
NaughtyPines
⋅
@TransitMan, That probably would also be fine with a small caveat: time generally isn't on your side with VXX, UVXY, or any volatility product that is subject to contango erosion and/or beta slippage. If you don't get a pop fairly quickly, contango/beta slippage may start to erode the position such that it'll take a bigger pop to get out of the play profitably or make it less profitable if you get a pop late in the cycle after which contango has done its damage. Consequently, if you do decide to go longer dated, it may be to your advantage to place the spread a smidge "deeper" (e.g., the short call strike not at the money, but slightly in the money) to allow from some erosion/beta slippage if you don't get a pop right away. Here, I'm kind of playing for some possible volatility late in the year/early in the next, as the market takes year end profits at these all time highs and/or does "window dressing" selling, along with reinitiating positions at the beginning of the year, which is in part why I went with the Jan.
NaughtyPines
⋅
@NaughtyPines, Naturally, if you were riding the elevator down (when contango and beta erosion are on your side), it would definitely be to your advantage to go longer dated to give you time for volatility to mean revert and contango/beta erosion to work in your favor.
TransitMan
⋅
@NaughtyPines, Great stuff as always Thank you sir the enlightenment and analysis !