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Yeah but is that actually tradeable or just viewable?
Ben jawboning always does doesn't it?
The VIX? CBOE Volatility Index....Currently 15.3
Sam, what going on?....You think Ben jawboning tonight might cause some volatility?
CanOz
Yeah but is that actually tradeable or just viewable?
Ben jawboning always does doesn't it?Nah I'm curious as well, heard of the VIX etc. but thought it was just a viewable thing.
How does one trade volatility? Is it even possible? Say I think the market will increase in volatility tonight, is there a volatility index I can get long on so to speak?
Depending on how the market perceive volatility, the price of a VIX futures contract can be lower, equal or higher than the VIX spot price. Often, due to the mean-reverting nature of the VIX, when the VIX is low, VIX futures trade at a premium and when the VIX is high, VIX futures trade at a discount.
You can buy an ATM straddle and run a delta hedging regime for a close synthetic.
....what?
A long straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a big move either up or down. Typically, investors buy the straddle because they predict a big price move and/or a great deal of volatility in the foreseeable future.
Ah, is that what Taleb was doing all the time? Looking to profit from extreme moves...that way he had a predetermined amount of risk and a potentially large reward...?
So what would you buy this straddle on? SPY?
Any index instrument? SPY/ES, QQQ/NQ, etc.
Depends on the size. Underneath a certain size it is probably most convenient to just buy VXX.
Long volatility isn't an easy game, the market is almost always in contango. You need to be comfortable with trend following batting averages.
I very rarely do long vol against the overall market, my model tracks a small basket (<10 assets) of sector ETFs and indices.
Ok thanks.
So you do long vol against a handful of stocks instead? What's the benefit? More chance to be volatile?
The Empirca and Universa underlying model is essentially long volatility, but its significantly more complicated than simply purchasing long straddles. My impression was that they generally buy OTM puts rather than both legs of the straddle.
My basic understanding of going long straddles, is that it is best in flat conditions, when expecting a break either way.
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