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Longputvertical

TRADE IDEA: VXX FEB 9TH 27/30 LONG PUT VERTICALAnother mechanical short volatility trade put on in the weeklies in VXX (while I wait for UVXY to do "the splits"). The February 9th weekly should open tomorrow and with VXX trading slightly below the 28 handle, I'm going to look at filling some 28/31's in that expiry for a 2.25/contract debit. Given the fact that the February 16th 28/31's are trading around that mark, I think my chances for a fill at 2.25 are decent ... . If I can't get filled for less than 2.30 for that setup, I may cave in and go with the 27.50/30.5's ... .
CBOE:VXXShort
by NaughtyPines
2
OPENING: VXX FEB 16TH 28/31 LONG PUT VERTICAL... for a 2.28/contract debit. Frankly, was somewhat surprised that this appeared to have a 2.27 mid at open, since 28 is right at the money, and the market doesn't usually accommodate that kind of fill unless the short put is deeper ... . I was going to wait for the February 9th's to open, but I have a "spot" within the nooks and crannies of my February 16th 27/29 2x2 long put vertical to squeeze this in here and if someone's going to fill me for 2.30 or less on a three-wide, well, who am I to question ... .
CBOE:VXXShort
by NaughtyPines
COMPARISON AND CONTRAST: CREDIT SPREAD OR DEBIT SPREAD?You may have heard me say in the past that you should use high implied volatility strategies in high implied volatility environments and low volatility strategies in low volatility environments. A credit spread is generally considered a high volatility environment play, while a debit spread is considered a low volatility environment play. Consequently, since we're in a low volatility environment, I should be considering low volatility strategies, and pictured here is a Nov 17th 147/149 long put vertical in the November expiry. It's a bearish assumption play that costs an .82 debit to put on, has a max profit metric of 1.18/contract, and a break even of 148.18. Max profit is realized on a finish below 148.18, but I'm generally looking to manage these early, taking profit at 50% max of what I put it on for. In comparison, a short call vertical at the exact same strikes has metrics that are virtually identical -- a Nov 17th 147/149 short call vertical brings in 1.17 credit at the mid and has a max loss .83 with a break even 148.17. For all practical purposes, the two plays have exactly the same risk. It is consequently a myth or a basic misunderstanding that by paying for a debit spread (instead of receiving a credit for a credit spread), you're starting out "under water" or "behind the eight ball." Regardless of whether you think you're starting out "in the hole," the important thing is how much risk is present in the set up, and comparable put side/call side set ups have exactly the same risk. So, why would I choose a debit spread over a credit spread if the metrics are exactly the same? The answer: flexibility. Consider what would happen if price continued to rip away from your bearish assumption setup in the case of a short call vertical versus a long put vertical. In the case of the short call vertical, the short call increases in price (it becomes more "monied"), as does the long call. In the case of the long put vertical, the short put decreases in price, as does the long put (they become less "monied"). In both cases, the setups start to "go red." Unfortunately, in the case of the short call vertical, there's not much you can do to take advantage of the situation besides wait (you can roll the long call away from current price to lock in its increase in value, but this widens the spread, and therefore increases your risk and buying power reduction). With the short put vertical however, you can potentially "work it" intra-expiry without increasing your risk and to potentially mitigate loss, and that is by rolling the short put toward current price on the options decrease in value, rolling a long put vertical into a narrower vertical or rolling what was a long put vertical into a short put vertical. Naturally, you want to do any rolls like sparingly and mechanically (e.g., roll the short put to the 30 delta at 30 days until expiry) ... .
AMEX:IWM
by NaughtyPines
1
TRADE IDEA: SPY JUNE 24 207/210 LONG PUT VERTICAL (GTC ORDER)Given the fact that /ES, SPY, SPX500 continue to conform to the downward sloping yellow channel, I'm looking to continue to short on meaningful retraces of price, ideally to the upper bound of the yellow channel, since I think this offers the best risk-reward here. I can do this one of several ways, for example, by entering a GTC order to short /ES, SPY, or SPX500 if price strikes that upper bound (currently around 2075). An alternative way to short via options is using a debit spread set up broken across that upper bound -- a SPY 207/210 or SPX 2070/2100 long put vertical. Currently, that spread is priced at a 1.73 ($173) debit for the SPY spread, but I don't want to pay that. As price moves toward the spread, it's price will decline. Given the fact it's a three-wide, I want to ideally only spend something like 1.00 ($100) on that spread, so I'll set up a GTC order for a 1.00 fill for this coming week and go from there. Notes: As you can see from my posts, I'm largely a premium seller, so my go to strategies are generally credit spreads. With SPY's implied volatility being somewhat low here (it would go even lower on an upmove), premium selling isn't that great here, so I'm looking for a small position alternative over entering a comparatively buying power heavy short /ES position ... .
FX:SPX500Short
by NaughtyPines
1
THE VXX PLAY (I WANTED TO PUT ON FOR THE "FOMC POP")When we had our first rate hike in umpteen million years in December, I had a play like this on for a GTC fill to fade any volatility spike we might have in response to that. Of course, it never came ... . But thanks in large part to Chinese markets, I've now got that spike and will fade it here if I get the chance. Here's the setup: VXX Feb 19th 16/17 long put spread (the 16 is the short, the 17 the long) Probability of Profit: 16% Max Profit: $93/contract Buying Power Effect: $7 per contract (at the mid price) (will that be around on Monday? Who knows?) Break Even: 16.93 Naturally, this is a total longshot setup at the outset. However, the idea is not to expect price to break $16.93 (that would be a "glory shot"), but rather to take it off at, for example, 50% of max profit.
CBOE:VXXShort
by NaughtyPines
A VXX SHORT SETUPI virtually never short a VIX product. I am, after all, largely a premium seller and, as such, am already short volatility in the vast majority of my setups. So, by shorting a VIX product, I'd basically be "piling on" to what I already do. I also virtually never do debit spreads ... . However, with FOMC next week, I thought I would at least consider taking a VXX short position that takes advantage of any spike in volatility that occurs, since this is basically a one-off event. I mean when is the next time we're likely to see the Fed raising interest rates after six years of QE, TARP, and ZIRP? Well, hopefully never, but quite possibly not again for a couple of decades, at least. So, let's get to it. I actually looked at a wide variety of setups that take into account the fact that I am not going to be hovering over my keyboard in the days and hours leading up to FOMC and the days and hours thereafter waiting to pull the trigger on a VXX short when I "think" it has peaked ... . This "peak" can be incredibly fleeting, not to mention that my luck with "calling tops" is about the same as that of everyone else -- pretty darn poor. In any event, I want to attempt to take advantage of a VXX spike (1) without knowing in particular how high it will potentially go; (2) knowing that volatility will inevitably contract at some point in the future to a point below 20; and (3) all while defining my maximum risk. Here's the setup to do just that -- a long put vertical. As an example: Jan 15 VXX 19/21 Long Put Vertical (The 19 is the short; the 21 the long). Currently, the mid price for this setup is a .79 debit, and that is with the price of the underlying at 23.32, but I do not want a fill at this price. When and if price spikes, the cost to fill this particular spread will decrease and the spread will become cheaper to put on. The kind of "cheap" I am looking for is something in the vicinity of .07-.13 for the spread, but for simplicity's sake, I am going to put on a GTC order for the spread to be filled if VXX spikes, resulting in the spread's costing .10 to fill. If I do get a fill for .10, the break-even price of the setup becomes 20.90 (the price of the long strike minus the .10 debit) with a maximum profit potential of $190.00 (i.e., risking $10 to make $190). You can also naturally consider more accommodative setups that have a higher break even by moving the strikes up or use more than just one setup at different expiries that take advantage of a potential spike that is more and more profound (e.g., a Jan 15th 19/21 long put vertical for a .10 fill, a Jan 22nd 21/23 long put vertical for a .10 fill, a Jan 29th 23/25 long put vertical for a .10 fill, etc.). If you do multiple setups at different expiries, keep in mind the possibility that you may want to roll one or more of those setups if volatility doesn't contract in fairly short order (2-4 weeks), so you naturally don't want to go hog wild either with respect to the number of setups or the size of the number of contracts used in those setups ... .
CBOE:VXXShort
by NaughtyPines
2