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cuttshot

VIX Options?

By cuttshot, in Options

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cuttshot    11

cuttshot
Posted

With the volatility that we have seen in the markets over the past few months the VIX has been all over the map. Has anyone traded options on a market that tracks the VIX like VXX? VXX is the ipath S&P 500 VIX Short Term Futures contract. Looks like it has decent volume and open interest.

 

Looking at the daily chart, if we get the VIX to pop over 30 again it might be an interesting long trade. Will have to keep an eye on it. If anyone has any experience with this product let me know.

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onlyvix    10

onlyvix
Posted

Hello cuttshot!

You can trade options and futures on the VIX, and options on VXX and VXZ, and I trade all of them. VXX is probably the easiest to get started - the ETF holds the front and second month VIX futures, and is most correlated with with index. Actual correlation depends on market regimes, but historically has been about 50%. One of the things you should keep in mind is that VXX was launched right around its theoretical peak value. Over the last year and half VXX has been trading it has lost about 3/4 of its starting value. However if you look at the underlying index -SPVXSTR, it would show that simply shorting the VXX can be quite risky. So to summarize - VIX derivatives are fascinating, VXX is probably the easiest to get started in, and know your risks before you trade!

~

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