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Hedging with the VIX

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Grinder

Grinder

Don't feed the bear!
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I just read interesting post on Waynes blog http://sigmaoptions.blogspot.com/ from another blogger Bill Luby of http://vixandmore.blogspot.com/ about the VXV the CBOE S&P 500 Three-Month Volatility Index. It got me thinking about using the VIX as a hedging instrument for my delta neutral trade on the SPX.

I try and stay delta nuetral as possible and use a variety of adjustments to hedge short vega when deemed neccessary, usually calanders, DD or strangles to do the job. It's served me well & if it aint broke why fix, right?

However, a call spread on the VIX or even a diagonal calander with the favourable vol skew looks like a viable alternative.

Tell me why you don't like it?
 
Grinder said:
I just read interesting post on Waynes blog http://sigmaoptions.blogspot.com/ from another blogger Bill Luby of http://vixandmore.blogspot.com/ about the VXV the CBOE S&P 500 Three-Month Volatility Index. It got me thinking about using the VIX as a hedging instrument for my delta neutral trade on the SPX.

I try and stay delta nuetral as possible and use a variety of adjustments to hedge short vega when deemed neccessary, usually calanders, DD or strangles to do the job. It's served me well & if it aint broke why fix, right?

However, a call spread on the VIX or even a diagonal calander with the favourable vol skew looks like a viable alternative.

Tell me why you don't like it?
Click to expand...

VIX options aren't something I have even looked at. But worth looking into.

I presume the options are on VIX futures?
 
wayneL said:
VIX options aren't something I have even looked at. But worth looking into.

I presume the options are on VIX futures?
Click to expand...

Sorry, noob in this area, but can you actually trade VIX futures? Simply betting on volatility........might be a good play at the moment, with a break surely coming soon one way or the other (note down) on the S&P......
 
Grinder said:
However, a call spread on the VIX or even a diagonal calander with the favourable vol skew looks like a viable alternative.
Click to expand...

Not an expert in this, but a fellow trader plays with these.

If you start playing with time spreads in the VIX you need to be well versed in backwardation and term structure of the VIX futures (which subsequently affect the options).

Otherwise a world of headaches
 
mazzatelli1000 said:
Not an expert in this, but a fellow trader plays with these.

If you start playing with time spreads in the VIX you need to be well versed in backwardation and term structure of the VIX futures (which subsequently affect the options).

Otherwise a world of headaches
Click to expand...

I think that's bang on.

IT seems to trade a consensus of opinion rather than the underlying spot VIX.

#### that!

Pass.
 
Note taken. Will continue to look into em to get a better understanding of their makeup structure.
 
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