tjlocke99

Sean might be best to wait until after the Fed announcement.

Interesting trade Chuck. Typically I think the traders here stay away from very low priced calendars and also look for high vol underlyings, so $.25 for at the cheapest about $4 to 5 round trip in fees would in general make this trade prohibitive.

Depending on your portfolio size, a very DITM put may be the best, however the extrinsic value is high even on pretty DITM puts.

Fair enough. I was thinking, oh then why don't people buy VIX options and hold leading up to the FOMC announcement. However I think the answer is that VIX options themselves have a "vol of vol" component. That VIX "vol of vol" will pop as well right?

yes but but given the volatility skew on the puts this would not work as a normal inversed risk reversal. if you went let's say 5% OTM both ways your put spread will cost you MUCH more then you can sell a 5% OTM call spread. You also open yourself up to much more losses if VXX goes up. if you just bought fewer call spreads you would have the same risk at settlement if VXX went up vs if it stayed flat.

The prospectus talks about VXX itself. Where does it say if the options are American or European style? I'm not sure what it is but if its European and can go into backwardation then i'm concerned these trades are ticking time bombs. Certainly the VIX calendars could have unlimited liability.

Yowster, what do these trades buy you using the credit from the call spread? You still have the margin requirement, so whether the cash in your account has to be held for margin purposes or is used to directly buy the put spread, isn't the return on investment the same (in other words the return on a debit outlay of 2 bear put spreads will be the same as the return on margin using bear calls)?

Yowster, since VXX is cash settled, a diagonal or any time spread using has unlimited liability correct? Again it is unlikely to go too far, but there is unlimited liability because the short front month can end up more expensive then the back month. Is this correct?

All of those factors could lead to a lower VIX as well. The Fed not raising rates, really good earnings leading to the S&P rising and VIX falling, . . . This is certainly not the most likely situation for VIX to fall, however given these rates with commissions you'd have to be right about 1 out of every 12 times to break even.

The statements about VXX have been true however if you buy VXX puts you do pay a huge premium in time value, so in many cases you do need a large drop in VXX just to break even. Yes that has GENERALLY happened in the past, but it is something to note. Even buying DITM puts 6 months to a year out will have pretty high time value unless you go DEEP in the money.

Kim et. all, Currently VIX Aug future trades near 15.35. If we look at VIX downside plays, let's say on the Aug options, they are trading near parity. Thus something like a short vertical call spread, short Aug 10.5, long Aug 11.5, has a mid of $1.00 credit and trades going off at a $.98 credit. Could someone help me understand this? I know commissions on VIX are higher, but if you can get in at a .98 to .99 cent credit isn't your risk to reward very high as you can only lose .2 cents plus commissions? I know these would be very low levels for VIX but not unheard of and you'd be trading with the idea that with commissions you risk about .05 thinking there is a greater than 5% chance that VIX will be below 11.45 in Aug. Please let me know your thoughts. Thanks.

Kim a complete aside but do you feel Jeff Augen is still a credible source? I am not saying anything rude but a site I saw him associated with the last year was disconcerting.

Thanks Kim!

This isn't a typically hold through earnings trade as it only cost luxmon $.01 which even with GRPN's low price is still not much to lose. Kim what was the downside to this? Is the likelihood of reasonable returns that bad?

congrats Kim on another job well done!

Thanks for the feedback. Any other early spreads you are looking at?

Thanks Kim. Well the issue is that yes it would cause a margin call for me. I only have a $10k account. Also the other issue I see is if DITM calls end up not being liquid. I have had this problem numerous time with options, especially any that aren't heavily traded. As the option gets DITM the bid/ask gets so wide that it eats up alot of the profitability. Meanwhile the short option still has a tighter bid/ask.

Thanks Yowster. I don't do the options based covered call using a diagonal with a long DITM call and a shorter term short call anymore. That strategy seems to work best when the stock is flat to mildly trending up. Otherwise you get burned on the gamma on a large move up and burned on the delta on a large move down. Have you got fills anywhere need the mid on GPRO options? Perhaps the verticle I original listed isn't a bad trade.

GoPro has been a wild stock. Some commentators feel that it has been in a short squeeze. I believe some of the DITM calls are upside down because of the difficulty borrowing the stock. The OTM call spreads could be attractive, except that the bid/ask spreads are very wide. I was wondering if: 1. Anyone had any thoughts if there was any effective way for retail could trade GoPro 2. I am wondering if there is any assignment risk in purchasing an OTM call spread. For example with the stock around $90 now, let's say I can get the 95/105 Nov 3 Bull Call spread for around $2.25 (bid is .60 and ask 3.45 so this price would be well above the mid). It seems if there is a short squeeze there could be a disaster with being long or short calls, especially if they are illiquid. Here is one scenario. I buy the spread in #2 above. On 25 Oct the stock is at 110. My DITM call is actually under trading at $13, and I actually lose money trying to close it. I am also unable to close the short 105 due to lack of liquidity. Alternatively, as its DITM and illiquid I want to exercise the call, but I don't have $9500k in cash in my account. Just looking for some expert advice if this is a dangerous trade. Forgot the potential loss of value on the spread if the stock doesn't move or goes down, just is there inherit option exercise risk. Thanks!

Thanks Vancouver. This info helps, but it definitely helps for the record to state what price the underlying was trading at that the time you bought the options.

There have been studies done on this and sites devoted to it. You can look for yourself, but trading around at least now on unusual activity is generally not a strong trading strategy.

thanks Chris!

Chris, Good afternoon. Could you give me any incite into the technical analysis/indicators you use and any books or web sites you would recommend? Thanks! Richard

but why would a calendar be good? calendars are long vega and long theta. why would front month vol to drop faster than the long month? what weeklies/monthlies would you consider for this trade? thanks!

Why do you think a calendar would be good hear? You think vol will be higher in the short front month and also vol will hold-up better in the long back month? Thanks!