VIX - Volatility Index

[Vincenzo Corleone]

Does anyone know anything about buying calls in the VIX index?

[wabmester]

What does it mean to buy a call for something with no underlying security? What would you get if you exercised your call?

[Nords]

Originally Posted by wabmester

What does it mean to buy a call for something with no underlying security?* *What would you get if you exercised your call?

I think that's why it's so hard to find information on VIX calls...

[Olav23]

http://www.cboe.com/Products/indexop...ions_spec.aspx

Yes, there are options on the VIX. I believe its all cash settled, as like you said, there is no underlying security to get exercised upon. Reminds me of Weather Futures- I'd like to take delivery on 10,000 hurricanes please!

Derivatives are a crazy game!

[haha]

Originally Posted by wabmester

What does it mean to buy a call for something with no underlying security?* *What would you get if you exercised your call?

OEX are cash settlement options.

Ha

[wabmester]

Makes sense. (Well, it makes more sense for Vegas.)

So, it seems like the european-style options on VIX mean that you have to guess *when* volatility will change, not just that it will change sometime in the future (which would be too easy). I wonder why people were opposed to DARPA's idea of a Policy Analysis Market. It doesn't seem like much of a stretch from what we already have.

[poyet]

Whatever the derivative, the pricing model remains a black&scholes and the time always plays against you. This is what makes it especially difficult to make money with derivates for the lambda player say, because you must be right and on time ! Of course there are other means to play volatility with straddles, etc. but I do not see all that leading non-professionnals to ER !

VIX has been low for some time and those who would have purchased short term call would have lost their principal (100% loss) over the last months as VIX (SP100) is even lower now (though bumpy last night) ! You could trade the VXN (Vol on NDX) which is bear since 25/03/2003 with two bear traps 18/05/04 and 13/08/2004, but still decreasing...

Better purchase QQQQ on a long market, keep it as long as the market's LONG, sell and ER !

Remember of Ed Sekota, if putting the chart on the wall I cannot say whether I should go Long or Short I trade something else... turtletraders.

Cheers, Patrice.

[maddythebeagle]

On the weekends, they have a "options made easy" infomercial in between the little giant and oreck air cleaner. I am still working on the buy real estate with no money down tapes, so I dont know...

[justin]

Originally Posted by poyet

Better purchase QQQQ on a long market, keep it as long as the market's LONG, sell and ER !

Wouldn't this strategy work with any security, not just QQQQ? Buy X in a long market, hold as long as it goes up, and sell it before it goes down?

[Nords]

Originally Posted by justin

Wouldn't this strategy work with any security, not just QQQQ?* Buy X in a long market, hold as long as it goes up, and sell it before it goes down?*

It's worked for a long time:

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."
-- Will Rogers

[justin]

I read a research report recently that said almost 100% of the people who sold a particular stock after seeing that stock go up in price realized a profit on the trade. I think this technique may also work well to make money. Long term I mean.

[Olav23]

Originally Posted by poyet

Whatever the derivative, the pricing model remains a black&scholes and the time always plays against you.

Though you could make an argument for the flip side. If you are an option Seller/Writer, the time is to your advantage, as it means a bigger premium to pick up.

[poyet]

If you are an option seller/writer which I would deter any of you (unless you are covered and own the underlying, e.g. stock to deliver if things go against you), then you potentially face an unlimited loss... for a limited profit, the premium you got for the risk !

Well, going into the details would require more space and I'm not sure that it would be relevant to this forum :-)

Patrice.

[poyet]

Justin & Nords,
QQQQ was an example of a chip basket of trendy stocks, with extreme liquidity avoiding slippage, even though you would get in with a 10M$ market open order ! You can also short it and therefore design simple L&S strategies for little brokerage costs. That was an example.
More of what I do @
http://tradingautomation.blogspot.com/
Patrice.

[haha]

Apparently there are futures on VIX, as well as options on the index. There may even be options on the futures! Can one also buy an exchange traded product that tracks VIX?

Ha

[Olav23]

I can't even buy a micro-cap (you'd imagine a relatively important asset class) or Goldman commodity index ETF, and you think they are already to the level of VIX etfs!!! hehehehe

I think etfs are relatively new beasts, maybe around 5 years old? Its just yet another way for the brokerage houses to beef up commissions. Expect ETFs on Options on Futures on Currency coming to you by 2010.

[haha]

I think these VIX instruments might be vaporware. I can't find any quotes for options, or for futures. If anybody has info to the contrary, could you give me a symbol and the url where it works?

Thanks, Ha

[HFWR]

VIX.....

vaporware.....

Pun intended :P

[Olav23]

Originally Posted by Have Funds, Will Retire

VIX.....

vaporware.....

Pun intended :P

Looks like the initial target date was Apr 22 for the options, which has since come and gone to give market makers more time to "prepare" whatever that means.

http://www.cboe.com/AboutCBOE/ShowDo...=20050318a.doc

It looks like the futures are traded though, and I see prices here:
http://www.cboe.com/cfe/data.aspx

if you wanna go the futures route...

[poyet]

ETF on volat indexes: not that I know.
Patrice