[Northern boy]

I'm looking for a way to short volatility in a quantifiable manner, (so not just writing strangles or straddles earning fixed premiums).

I'm not looking to simply short volatility either, it would need to be in the nature of an option. In essence, I want to profit from an improbable(<5%) decrease in volatility in order to hedge a strategy which is successfully long volatility most of the time(>95%).

Buying puts on the VIX would be lovely, but as far as I can tell the VIX is garbage and just negatively correlates the indexes more than anything... it doesn't seem to care much for volatility in price to the upside.

My knowledge of options is limited but if you know what I'm looking for go ahead and say it and I'll understand. If it's doable on an intra-day level, even better. If this method isn't common knowledge then I'll just get creative. thanks.

[Frank]

You should check out VIX futures -- and more specifically, study the fascinating relationship of VIX vs VIX Futures.

Larry McMillan has done some excellent work on this topic. Read the first few pages of this piece he did for a primer on the 'term structure of VIX'...

http://www.quickfilepost.com/downloa...b24962f03732b3

you can get end of day VIX futures data here:
http://cfe.cboe.com/Products/historicalVIX.aspx

[Northern boy]

Thanks for the reply Frank. I don't believe the purpose of the VIX as a 30-day fear gauge is what I need though...

I'm beginning to think that writing a strangle deep in-the-money is in fact an option with the odds I'm looking for.

[Northern boy]

more ideas welcome

[brownsfan019]

NB - not sure how many option traders are here to be honest. Might be able to find a few more at elitetrader.

[james_gsx]

What exactly are you trying to hedge? There are plenty of ways to short volatility, especially in terms of hedging. But I think writing straddles and strangles on the SPY might be a good start.

[Northern boy]

Originally Posted by james_gsx »

What exactly are you trying to hedge? There are plenty of ways to short volatility, especially in terms of hedging. But I think writing straddles and strangles on the SPY might be a good start.

yeah I think a short strangle near-the-money works... I'm not used to options . I'm just using the options simulator at www.888optionsnet.com and that strategy so far fits best for me.

I'm hedging an improbable stochastic... for example the probability that a stock trades between 30 and 32 ten times before it breaks to touch 33 is very low. So I wanted a low risk, low probability, high reward trade to hedge against this.

See, a far otm "VIX" put would work too if it actually did index volatility.

[Northern boy]

Ok I found it, was a long butterfly call. I was looking for something that went positive on theta exponentially. B-E-A-utiful .

thanks for the help .