|
Post by theMist on Jan 17, 2017 15:08:20 GMT -5
Wow! Couldn't have timed leaving any better. Covered TVIX short at 6.58 and just got back and it looks ripe for reshorting again for another day trade. lol I'm not sure, seems like the SP500 is headed down some, I agree Walnut - just looked at S&P daily chart. Post chart shortly.
|
|
|
Post by theMist on Jan 17, 2017 15:14:34 GMT -5
Should've pulled the trigger on TVIX short as soon as I came back. lol
for quick scalp - lol
oh well
|
|
|
Post by theMist on Jan 17, 2017 15:18:04 GMT -5
one last quick trade - 10k short TVIX at 6.71
mental stop at 6.80, goes red take profits (trying to get near lod)
TVIX 5 min looks like it wants to rollover again...we'll see
|
|
|
Post by walnut on Jan 17, 2017 15:18:27 GMT -5
This is an interesting hedge I found. The delta neutral ratio when the trade began would have been 1000 long VXX to every 4000 puts bought. Made $1.83 over 60 days and no risk, beyond the premium cost. This one makes money both ways. If it does nothing, you will lose your premium. But you can't get a nasty volatility shock, you would make money. This is the one I posted about this morning.
|
|
|
Post by theMist on Jan 17, 2017 15:27:14 GMT -5
Please explain Walnut - what exact trades did you put on? or are you just feeling out this new strategy?
Buy 1k VXX and buy 4k puts?
how far out?
|
|
|
Post by walnut on Jan 17, 2017 15:31:00 GMT -5
Here have a look at this again. I did not do it yet. I have a VERY bad habit of testing crazy ideas with large amounts of real money haha I am studying this one more first but very interested so far. ---------------------------------------- Had another VXX hedge idea last night Will check it out trying to use historical data later today
Buy out of the money VXX puts, like Mar 17 19's delta about .25 Then buy a delta matched number of VXX shares (250 shares per 1000 options)
Then if VXX goes down, the more it goes down the higher the option delta gets and you make money. If VXX goes up, your long VXX makes more and more money as the option delta goes down.
Only risk is that VXX does nothing and you lose your option premium.
The main premise is that VXX out of the money puts are undervalued because put-call parity does not permit pricing in contango decay into the options. VIX options price the non-normal probability into the options but VXX options do not account for it.
|
|
|
Post by theMist on Jan 17, 2017 15:37:23 GMT -5
Interesting strategy
And BTW - I never knew that about VXX options
BTW - it would make more sense now for SCAMs to spike now after that big fat January contract expires today. Now contango going forward is cut in half approx. at 10%. Am I not seeing it correctly? Also, do you know exactly when it takes place? After normal market close 4pm EST (3pm CST) ?
|
|
|
Post by walnut on Jan 17, 2017 15:44:14 GMT -5
Here is what I have learned. VIX index options are crazy. They are priced weird and are USELESS. I do not know why they exist. Only a fool would buy one. The options exactly mirror the same months futures but with huge bid ask spreads. And they do not incorporate standard options math. They are VERY STRANGE and useless, because of the odd returns distribution (Poisson distribution) of the VIX index.
VXX also has a strange returns distribution, but the options market makers have not accounted for that in their options pricing for the most part. This fact might allow for exploits such as this hedge that DOES WORK if the VXX is moving in either direction. The only way that VXX options are strange is that the longer term in the money options tend to get bid up to an overpriced level due to hedging.
|
|
|
Post by theMist on Jan 17, 2017 15:50:09 GMT -5
It can't be that easy. Are you sure you analyzed it from every angle?! If it works, you found THE FLUX CAPACITOR!!
|
|
|
Post by walnut on Jan 17, 2017 15:51:11 GMT -5
We do not have this puzzle cracked yet but I will let you know what I learn about this hedge. It can't be that easy. If so, you found THE FLUX CAPACITOR!!
|
|
|
Post by walnut on Jan 17, 2017 15:53:19 GMT -5
Remember this big caveat- if the VXX does not go up or down, you will lose your premium. Which would be pretty expensive. There are lots of periods over which it would work. But you could easily hit it wrong, too. You cannot lose more than your premium, and you almost certainly would not lose all your premium. But it is possible.
Anyway, will study it more...
|
|
|
Post by theMist on Jan 17, 2017 15:53:47 GMT -5
I'm laughing so hard after watching that Back to the Future video over and over...
|
|
|
Post by walnut on Jan 17, 2017 16:00:04 GMT -5
"Also, do you know exactly when it takes place? After normal market close 4pm EST (3pm CST) ?"
I don't know I think at close. The Jan futures is only .05 above the VIX index at the moment.
|
|
|
Post by walnut on Jan 17, 2017 16:03:14 GMT -5
|
|
|
Post by walnut on Jan 17, 2017 16:13:31 GMT -5
The only really good bet on the scams that I am aware of is to simply sell the big spikes and ride them down. But even that has big risks, what if the spike turns around and turns into a mega spike. Just watching your account close and out guessing the market is the only answer. I hate that, wish there were a flux capacitor for VXX.
|
|
|
Post by theMist on Jan 17, 2017 16:34:56 GMT -5
So far, I see this playing out very similar to August thru Sept (circle area). S&P is bouncing off support in steep light blue rising channel (steep channel is unsustainable). I see S&P hitting the first green arrow target and possibly bottom green arrow which is support for larger RISING channel. Maybe a quick head fake to new highs before selloff and some more sideways action before the dive. That would line up with DOW 20k. Also, look at indicators - very similar to back in August thru Sept. MACD and MACD Histogram is bearish. ADX is dropping indicating a BIG move is coming and could see DI lines crossing bearish. Weekly candles also looking toppy. Weekly MACD and MACD Histogram still bullish but looks like it wants to roll over. In short, risk/reward isn't worth being bullish S&P right now and I'm looking for S&P to fall off a cliff in the short term. I see S&P sharply pulling back in short term and that would honestly be healthy for this Bull market before it continues higher. We are overdue for a short term pullback. IMHO S&P Daily S&P Daily (zoomed out a little) S&P Weekly Indicators below
|
|
|
Post by novie08 on Jan 17, 2017 16:39:59 GMT -5
Love that movie! Walnut and Mist, just as a useless piece of information, I sat next to a hedge fund guy on a flight from NY last year. He was like chatty Cathy, his fund was to mitigate market volatility he said. I tried so hard to get more info out of him, I think he was stunned that a random little ole lady had any notion whatsoever about what he was saying. He talked all the way to Charlotte and showed me his interview on some TV show, don't remember which one. He is moving his business to Asheville and has been commuting for 2 yrs. You should go to work for him...his credentials were not all that great when I looked him up!Not compared with others I know of in the business. He had a gorgeous mansion in Purchase and probably another in Asheville. If you want to know his fund, etc. I can look it up. Probably no point tho. Just a hoot for me!
|
|
|
Post by walnut on Jan 17, 2017 16:47:19 GMT -5
That is one reason traveling is fun, no telling who you are gonna run into.
|
|
|
Post by novie08 on Jan 17, 2017 16:51:12 GMT -5
Here's the video, it's more interesting to me this year: video.cnbc.com/gallery/?video=3000470330It was CNBC. P.S. I was very sick so my dear daughter upgraded me to first class. Then I had the free entertainment.
|
|
|
Post by walnut on Jan 17, 2017 16:53:41 GMT -5
Me and Mist are gonna set up a hedge fund when we perfect the flux capacitor.
|
|