VIX/VXX Diagonals

[tjlocke99]

Good morning.

Is anyone still doing the DITM diagonals with VXX leaps and if so how is that working? If one was to enter the trade now what strikes and expiration would you recommend?

Looking for something else to slightly protect against a making market drop.

Thanks!

Richard

[Rogers]

I have a VXX July 16-18 call spread open. It's down a little as overall volitility is dropping.

[Kim]

I think this is Chris' territory..

[Marco]

I'm long some VXX LEAPS since mid march when VXX was 21.5 and keep writing calls and/or puts against that position to have more or less long VXX delta depending on my market view and how long delta I am in the rest of my portfolio. So I consider that a bit of a hedge rather than a position that is going to make me a fortune. So with VXX down from 21.5 to 17 as I write this I broke even since March. (which is not that bad considering VXX is down 21%) However I only achieved that by also selling puts against these LEAPS. The problem with VXX is that due to the negative roll yield it loses every month even with a stable or slightly higher VIX. Currently it's ~8% a month that you lose with Implied vol/VIX unchanged. So to offset that you need to get 8% in premium. With VXX at ~17$ that's ~1.36$ until July. Selling the July 18 Call gives you only 1.21$ premium. So you cap your upside at just 5.8% higher while having the full downside and still losing a bit of money with VIX unchanged in 1 month time.

Neither a great money spinner nor a great hedge if you look at it this way.

[Rogers]

I will say that my call spread is doing very well today...

[cwelsh]

I got out of the VXX LEAP trade last time it went up (around may 20-21) -- I got a moderate return, but not as high as I wanted -- was only averaging about 1% a month. It's a bad trade when the markets keep easing upwards. Due to the fact that the VXX will invariable spike now and then, its a pretty safe trade because you can get out on the spike (could have exited the VXX leap at various points in march, april, and may, and always at least broken even, even with the overall trend) But hard to make money on it trending in one direction.

That said, if it drops next week into the 15 levels, I'll certainly look at it again.

[tjlocke99]

Thank you everyone for this input. We have had some long threads about hedging, but I did not like the SPY put ratio play and was looking for an alternative that would give me partial coverage.

Thank you again.