WEDNESDAY 01/18

[walnut]

Meh, the VXX puts are just not quite paying enough.

[theMist]

Question for Huh - 

I've been so glued to watching S&P, VIX futures, VIX SCAMS and haven't really been watching FINS, Small Caps, REITs, SEMIs etc.

What are you using to chart the underlying indices?   For example, ticker used to be RIFIN-X, RUT-X...

Not sure if they changed tickers but can't seem to find.

?

[theMist]

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.

How is this strategy turning out so far?   Honestly, I get a little nervous when your strategies start off by saying BUY VXX shares....  lol

Check back with you guys around 1pm.  I should have free for an hour in between commitments today. 

[walnut]

This works but I have a tough time being willing to pay the price for option premiums. I just don't like doing it. The at the money premium is $2

Jan 18, 2017 11:26:53 GMT -5 theMist said:

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.

How is this strategy turning out so far?   Honestly, I get a little nervous when your strategies start off by saying BUY VXX shares....  lol

Check back with you guys around 1pm.  I should have free for an hour in between commitments today. 

[novie08]

Thanks. I know you posted that site before but somehow didn't have it.

[walnut]

Buying volatility cheap and selling it high is the point. That can come in many forms.

High implied volatilities vs actual volatilities. Selling expensive calls on any market type underlying is correlated until VIX goes parabolic. Then nothing is correlated anyway. But it might give you time to get out with less damage.

[walnut]

Amazon calls are priced at more than double their statistical value. Selling those calls is a better deal for being long volatility (the hedge) than any options I have seen on the scams.

Due to the put-call parity equation, Amazon puts are double their statistical value, so selling the calls is the only way to be long volatility at a big bargain.

[theMist]

As opposed to selling SPY calls as a hedge?

[walnut]

Amazon calls are 37.5% implied volatility, 17% actual historical 30 day volatility.

SPY calls are 7.5% implied volatility, 7% actual volatility.

If you can accept AMZN as a general proxy for the market, AMZN calls are a much better deal as a hedge.
You can't make any money using fairly valued options, your profit is the degree to which you get a good deal.

The trade would be, calculate the number of calls at a given strike and delta you need to hedge a short VXX position, and sell that many calls/sell the VXX. You don't have to be fully hedged.

Worth studying some more I think

[walnut]

Amazon reports earnings on Jan 26. So I think that is probably why the options are so overpriced looking, I'll pass on that. I have tried selling options on earnings a few times before, too stressful and they often do end up in the money.

[theMist]

Checking in from cell phone.

Got ya walnut. Would explain why so expensive. Reminds me of my apple experience. Lol

[huh]

Jan 18, 2017 11:13:14 GMT -5 theMist said:

Question for Huh - 

I've been so glued to watching S&P, VIX futures, VIX SCAMS and haven't really been watching FINS, Small Caps, REITs, SEMIs etc.

What are you using to chart the underlying indices?   For example, ticker used to be RIFIN-X, RUT-X...

Not sure if they changed tickers but can't seem to find.

?

For convenience sake I simply watch XLF, IWM, SOXX for fins, small caps, semis (I never watched REITS)

Those aren't (or at least weren't) the actual indices but good for determining direction/momentum.

I don't know if IWM and SOXX invest in a different index any longer. Perhaps they are now there own index? For example, SOXX caps it's holdings to 8% in companies. I don't believe that corresponds with any other semi index out there.

Maybe someone else knows better.

IXM is the FSCharts ticker for the underlying index for fins