New Trade $VIX Rubbing Us Wrong At 5 Year Lows

WithSpotVIXapproaching52weeklows,andtheSPXmatchingmulti-yearhighswefindithardtositonourhandsandnottakeashotforashorttermmovebacktothemidorhigherteensoverthenextmonth?

Atsomepointsoon,theVIXwillnotbeabletogoanylower,whichdoesntmeanlookingforwaystoplayforabouncewillbeprofitablegiventheunusualskewtowardscallsintheproduct,butasweheadintoQ4earningsseason,andamonththatshouldbelitteredwithpoliticalwranglingaboutthedebtceiling,wethoughtitmadesensetohavealongVIXstructureinourbackpocket,onethathasagreatpayoutifthingsgetwild?

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TRADE:VIX($13。

56)BoughttheFeb17/20/23CallFlyfor。

27*

-Bought1Feb17Callfor1。

12

-Sold2Feb20Callsat?

1。

26?

(。

63each)

-Bought1Feb23Callfor。

41

Break-EvenonFeb13thExpiration:

-Profitsbtwn17。

27and22。

73,makeupto2。

73,withmaxgainat20。

00

-lossesofupto。

27btwn17。

00and17。

27andbtwn22。

73and23,withmaxlossof。

27below17orabove23。

*withspotat13。

56thescreenbidaskforthebutterflywas。

10at。

40,Ibid。

30andgotfilledat。

27,thisisaveryimportantfactwhenitcomestotradingthisproductrarelydouhavetocrossfullbid/asktogetdone。

TRADERATIONALE?

RememberthattheoptionsarepricedoffofVIXfutures,notthespotVIX,theygenerallymoveinunisonbutnotbythesamepercentagesandarecertainlynotthesamething?

Asaresult,currentFebVIXFuturesat16。

20meansthattheVIXspotof13。

60isnotthetrueindicationofhowFeboptionsarepricing?

However,weboughtacallflythatoffersgoodrisk/rewardiftheVIXspotdoesmovehigherasweapproachthegovernmenttalksinthenextmonth。

IAMRISKINGWHATIAMWILLINGTOLOSEHERE,THEREISALOTOFWOODTOCHOPFORTHISTOBECOMEPROFITABLEINTHENEXTFEWWEEKS,BUTWITHANEARLYA9TO1POTENTIALPAYOUTFOR?

AMOVEBACKTOTHEHISTORICALAVG,IWILLJUMPINANDPLAYTHISATLEASTINSMALLSIZE。