VXX weekly

[cwelsh 1,549]

Ok, everyone knows how much I hate this trade, but, with the huge move in it today, and the great pricing, I could not resist:

I just bought the 14/15/16/17 weekly VXX RIC for .43.

Yes it's commission heavy, but I don't need that big of a move for it to be profitable. However, since it pretty much has to be held to at least wed, most likely thurs, there is a risk.

[Rogers 263]

seems like a good trade. vxx has been jumpy lately..

[tjlocke99 18]

Ok, everyone knows how much I hate this trade, but, with the huge move in it today, and the great pricing, I could not resist:

I just bought the 14/15/16/17 weekly VXX IC for .43.

Yes it's commission heavy, but I don't need that big of a move for it to be profitable. However, since it pretty much has to be held to at least wed, most likely thurs, there is a risk.

what are your profit targets? thanks.

[jr1221 12]

so playing an IC, you're expecting VXX to have little movement for at least 2-3 days next week? I mistakenly thought you frequently play weekly RIC's on VXX when you are able to play consecutive strikes (was it you who said he likes to play this trade as long as it costs less than .70 to enter?)?

[cwelsh 1,549]

With the VXX it's hard to set hard and fast profit targets, with the price I got in on, the target is pretty high -- I'd expect about a 20% return on this one with an exit on Thursday.

However, if I can get a big move on Monday or Tuesday (would have to be pretty big), and I can get 10-15%, I'd almost certainly take it.

[cwelsh 1,549]

so playing an IC, you're expecting VXX to have little movement for at least 2-3 days next week? I mistakenly thought you frequently play weekly RIC's on VXX when you are able to play consecutive strikes (was it you who said he likes to play this trade as long as it costs less than .70 to enter?)?

This is quite cheap for the position -- much lower than normal. This trade typically gets cheaper right after (1) VXX takes a huge drop (as today) and (2) in shorter trading weeks (as next week).

Also, the .70 was on the GLD trade, (and I still don't like that trade, but I do do it occasionaly if everything lines up just like I want and it fits my risk tolerances)

[jr1221 12]

This is NOT a RIC/Short -- rather it's an IC. I bought the trade and WANT the move this time.

And, this is quite cheap for the position -- much lower than normal. This trade typically gets cheaper right after (1) VXX takes a huge drop (as today) and (2) in shorter trading weeks (as next week).

Also, the .70 was on the GLD trade, and that was also long the IC (and I still don't like that trade, but I do do it occasionaly)

Sorry if I seem stupid with the confusion...but right now we have an open trade in this forum for GOOG...we create an IC and we sell it, which to me means we are doing an RIC (selling a short, which is net a debit). So if you create an IC on VXX and you sell it (i.e. for your .43 net debit), isn't that by definition an RIC?

[cwelsh 1,549]

Sorry if I seem stupid with the confusion...but right now we have an open trade in this forum for GOOG...we create an IC and we sell it, which to me means we are doing an RIC (selling a short, which is net a debit). So if you create an IC on VXX and you sell it (i.e. for your .43 net debit), isn't that by definition an RIC?

A reverse iron condor is a debit spread

An iron condor is a credit spread

So yes, you are right, I'll change my earlier post.

When I learned all of this, I was taught you're either short or long an IC and didn't use the RIC term -- I'm trying to adjust too. However I still frequently refer to it as either being long or short an iron condor (that's what all my trade logs use)

[Kim 7,943]

A reverse iron condor is a debit spread

An iron condor is a credit spread

So yes, you are right, I'll change my earlier post.

When I learned all of this, I was taught you're either short or long an IC and didn't use the RIC term -- I'm trying to adjust too. However I still frequently refer to it as either being long or short an iron condor (that's what all my trade logs use)

Thanks for sharing Chris. Few comments:

Yes, there is some confusion between the IC and the RIC trades. Instead of referring to them as debit or credit spreads, I prefer to describe the IC as a trade where we sell the mid and buy the wings, and with RIC, we buy the mid and sell the wings. Why I like this definition more? Because you can buy the IC for debit if you do it with calls only or puts only (technically, it's a condor and not an Iron Condor).

Second, to stress again, if you decide to do it, make sure you have REALLY cheap commissions. Even with IB commissions, the trade will give up too much profits to commissions.

[cwelsh 1,549]

I just closed out the put side of the trade (14/15) for 0.57. After commissions, that's a 16.3% return.

As an added bonus, if at anytime the market tanks about 150 points between now and Thursday/Friday, I'll be able to exit the call vertical and increase the profits. (I could get out for 0.03 right now and increase the return by 6%, but, at this point, I'd rather hold for a market downtrend -- this is a purely directonal/speculative trade at this point)

[Rogers 263]

I just closed out the put side of the trade (14/15) for 0.57. After commissions, that's a 16.3% return.

As an added bonus, if at anytime the market tanks about 150 points between now and Thursday/Friday, I'll be able to exit the call vertical and increase the profits. (I could get out for 0.03 right now and increase the return by 6%, but, at this point, I'd rather hold for a market downtrend -- this is a purely directonal/speculative trade at this point)

nice job

[cwelsh 1,549]

nice job

Appreciate it -- I want to emphasize how unsual it was to see the VXX RIC priced at that point. It's much more common to see closer to .60, and even higher. Fortunately the VXX was effected like everything else in the declining volatility last week, which made it even cheaper.

IF you can get a very close to delta neutral RIC on the VXX, and can get it for under .50, I have a hard time thinking this trade will ever be a real big loser for the simple fact that the VXX always fluctuates up or down $0.50 to $1.00. Get in on Friday for less than $.50 (ideally around 0.45), and then sell the vertical on Monday for a small profit (or big if its available). But as long as I at least broke even on Monday, then the other side of the trade can be pure profit on a market swing. (This is my next big backtest project).

Other than the fact that this is hugely commission intensive, I'm open to people poking holes in this prior to me spending 25-50 hrs testing it.

[EugeneHill 4]

Have you looked into this more?

I just checked, vxx @ 11.51, 10/11/12/13 ric is going for .30.

I'm not going to take it though, the bid on the 10 is 0, and I already have a lot going on in vxx which is down pretty big for me.

Still, this seems abnormally inexpensive.

[Kelly Park 10]

This is odd looking. Even the Sep monthly is at .57 midpoint.

[cwelsh 1,549]

the RIC is almost always overpriced -- as are the straddles. I seriously looked into a strategy selling these, but the 4-5 times it blows out a year isn't possible to recover from.

Edited August 31, 2012 by cwelsh