Straddle Buy in VIX

[Steven Place]

This is the chart I’m basing the trade on:

The VVIX is the measurement of implied volatility in VIX options. Sort of the VIX of the VIX.

And it’s near 6 month lows.

We’ve got Fed voodoo on Wednesday and Jobs numbers on thursday. If everything is good, the VIX should collapse, and if it isn’t, then investors will load up on VIX calls, bringing premium higher.

REMEMBER: VIX options do NOT trade on the spot VIX. Instead we look at VIX futures, which are currently at 15 (while spot is 13.64).

Here’s the trade I like:

Buy VIX May4 15 Straddle for 1.80

Basically… if VIX is under 13 or above 17 by May expiration (in 2 weeks) then this trade is a winner. And if the VVIX spikes higher, it’s a winner too.

Holding period: 10 days.

[Steven Place]

I held this a little longer than I wanted, but with the spot VIX heading lower and the VX futures following down, we’re up a small amount in the trade– but I don’t want to hold on as there’s only so much more that can be milked out of this, and if the VIX pops then the losses can increase.

Sell to close May4 15 straddle for 2.05

[Author]

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