gleko 0 Report post Posted March 23, 2021 This strategy seems to make sense and indeed quite low risk unless very big unanticipated drops in VIX. So maybe we should just avoid that when VIX is above 40? Any opinion? The article is here:https://tradingmatex.com/low-risk-vxx-options-strategies/ Share this post Link to post Share on other sites
vasis 2 Report post Posted March 24, 2021 If you make backtesting you will see that just buying put is more effective and simple. You can play with strike and expiration date: DIM put is more stable but risky when ATM Put is more volatile with long periods of decline but positive on average. Share this post Link to post Share on other sites
Yowster 9,174 Report post Posted March 24, 2021 3 hours ago, vasis said: If you make backtesting you will see that just buying put is more effective and simple. You can play with strike and expiration date: DIM put is more stable but risky when ATM Put is more volatile with long periods of decline but positive on average. This may very well be true in backtesting, but just buying a put can expose you to a large percentage loss if the VIX were to make a large upward spike. So, the question is do you want a trade structure that tries to keep downside risk under control, or do you want a totally directional trade for VXX to fall? Both are valid choices depending on the investors outlook and risk tolerance. Share this post Link to post Share on other sites
vasis 2 Report post Posted March 24, 2021 1 hour ago, Yowster said: This may very well be true in backtesting, but just buying a put can expose you to a large percentage loss if the VIX were to make a large upward spike. So, the question is do you want a trade structure that tries to keep downside risk under control, or do you want a totally directional trade for VXX to fall? Both are valid choices depending on the investors outlook and risk tolerance. I personally tried to play different strategies (we had an interesting talk about PureAlpha or PureVolatility). The question about complex strategies is what to do after volatility spike - switch to buying put or transform it to another strikes with a big risk to miss downtrend (and even loss money there). Hold the original strike (where you bought put) even and roll options seem simple and relatively efficient strategy. Just IMHO. Yes, need to choose what game you play - just falling VXX or your estimation of proper option pricing (ivol of VXX) Share this post Link to post Share on other sites
JohnHL 3 Report post Posted March 24, 2021 7 hours ago, Yowster said: This may very well be true in backtesting, but just buying a put can expose you to a large percentage loss if the VIX were to make a large upward spike. So, the question is do you want a trade structure that tries to keep downside risk under control, or do you want a totally directional trade for VXX to fall? Both are valid choices depending on the investors outlook and risk tolerance. I have been using DITM VXX put (delta > 0.75) for shorting volatility. In late January VIX had a single day +60% spike, resulting in a VXX spike of +16%. I am now thinking to spend a small amount on insurance for this type of long tail risk. I am thinking of buying VXX call debit spread about 15% OTM. Do you think this is a feasible method, and what is a good percentage of insurance for the position size? Share this post Link to post Share on other sites
Yowster 9,174 Report post Posted March 24, 2021 31 minutes ago, JohnHL said: I have been using DITM VXX put (delta > 0.75) for shorting volatility. In late January VIX had a single day +60% spike, resulting in a VXX spike of +16%. I am now thinking to spend a small amount on insurance for this type of long tail risk. I am thinking of buying VXX call debit spread about 15% OTM. Do you think this is a feasible method, and what is a good percentage of insurance for the position size? I think it could work, the challenge now is VXX is cheap in dollar terms so the 0.50 distance between each strike represents a larger percentage move of VXX. You have more flexability when VXX is priced higher. When VIX is low this type of hedge is relatively cheap to put on, but after a spike the hedge becomes more expensive unless you use strikes that are farther OTM. Not sure about a percentage for the size, as that would partially depend on the profit potential in the call debit spread (price you pay for the spread vs its width) - so spending $1.00 to buy a call is not the same as spending $1.00 on a call debit spread. Share this post Link to post Share on other sites
JohnHL 3 Report post Posted March 24, 2021 (edited) @Yowster Thanks for the advice. For my trading method, I only enter such a trade when VIX is not high so the VXX call debit spread should not be too expensive. For current VXX price around $12.60, I plan to buy 2-month out 13.5/15.5 bull call spread that should cost around $0.35 - $0.40 in a 1:1 ratio. The insurance should cost around 25% of the average profit if VXX keeps going down. I don't mind giving up 25% of profit to buy the peace of mind. Edited March 24, 2021 by JohnHL Share this post Link to post Share on other sites
gleko 0 Report post Posted March 25, 2021 I have decided to follow their signals and will try to build this strategy in 2 steps as suggested. Will start with the spread in the direction of the latest VXX signal. What I like about this strategy is the hedge against volatility spikes. This is why I don't really like the single put approach. Even if losses are limited to the premium, you still have larger losses than with the strategy in the article. Share this post Link to post Share on other sites
gleko 0 Report post Posted August 31, 2021 I followed this strategy for 3 monthly expirations so far. I have followed their signals to open one spread at time. Since they have mostly been short volatility in this period, I just kept my strategy open with the max profit area between 15% and 20% decline in VXX. When their system was long volatility I simply sold one of the long puts I had, buying that back when the signal got back to short vol. They wrote another article with some interesting analysis to help us decide how far we should set out max risk area. https://tradingmatex.com/vxx-trading-based-on-fundamentals/ Anyone else tried this strategy? Share this post Link to post Share on other sites
vivianBlastov 0 Report post Posted September 2, 2021 On 3/23/2021 at 2:19 PM, gleko said: This strategy seems to make sense and indeed quite low risk unless very big unanticipated drops in VIX. So maybe we should just avoid that when VIX is above 40? Any opinion? The article is here:https://tradingmatex.com/low-risk-vxx-options-strategies/ this is needed in our passion, the low risk high reward formula . it keeps you on the safe side of the game, great article Share this post Link to post Share on other sites
vivianBlastov 0 Report post Posted September 4, 2021 On 9/3/2021 at 12:44 AM, vivianBlastov said: This strategy seems to make sense and indeed quite low risk unless very big unanticipated drops in VIX. So maybe we should just avoid that when VIX is above 40? Any opinion? The article is here snaptube vidmate I have to say that article concludes very rich info Share this post Link to post Share on other sites
