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Shortvolatility

Two Different Paths For ^VIXweve set lower daily highs aince the last major volatility event, and trended lower weekly to averages. the uptrend is not lost for vix and uvxy threatens to break out of tightening range or wedge/triangle. ive marked out what a test and failure of the trendline would look like, and ive also bar patterned the breakout scenario. im leaning short because i think the election result will be volatile, but have a buy the news impact on broader markets. this is bearish for vix in both scenarios.
CBOE:UVXYShort
by cerealindicator
normal election volatilityim buying the election outcome for either candidate. heres my reasoning. both are proposing fiscal spending. both are campaigning on tax cuts. both candidates are contributing to a loosening monetary policy and impact on competition to us ai or agi and semiconductors. big tech runs on venture capital and both candidates are leveraging some form of trade war. here im looking at svxy for clues about how recession proof the s&p500 is to large cap volatility. based on the recency of the top in svxy i dont think were going to begin a broader market stock recession near all time highs without setting a lower quarterly high that fails to bring us a new weekly uptrend. this looks like selling in the leadup to the election which should be bought whenever the index sets a clear rebound level weekly.
CBOE:SVXYLong
by cerealindicator
ROLLING: VXX MARCH 20TH 12/14 TO APRIL 17TH 12/15 SCV... for a .30/contract credit. Notes: A late post ... . Rolling out in this strength and widening the spread to force a credit. I'm fine with extending duration, so long as I can get something around one-third the width of any widening in credit. Here, it's .30 to widen an additional strike, so it's not quite one-third, but it'll do. The notion here is that it will eventually decay past 12, with the natural question being when ... . I also added some units (same strikes, same expiry) for 1.66/contract (55% of the width of the spread). You can naturally sell spreads higher up the ladder (e.g., the 16/18), but I'm opting to keep things simple rather than having a bunch of different spreads on at different levels, which can pose trade management problems if you want to extend duration. Will look to peel off units at VIX lows.
CBOE:VXXShort
by NaughtyPines
OPENING: VXX MARCH 20TH 12/14 SHORT CALL VERTICAL... for a 1.19/contract credit. Notes: Adding a little to my existing position (same strikes) on this pop. Although it now looks unlikely that we will clear the short call strike at 12 by March expiry given current price and average decay rates, we'll see how it goes. 1.09/contract collected on the first tranche; 1.19 collected on this one. In this particular case, both tranches are of an equal number of contracts, so I've collected (1.09 + 1.19)/2 = 1.14 per contract, so my position break even is the short call strike plus the per contract credit collected or 13.14. If you did two contracts on the first tranche at 1.09 and three on the second tranche at 1.19, your break even calculation would be /5 = 1.15/contract. Will look to shed units at 50% max and then roll out for duration and forced credit if necessary to give the remainder of the position time to work out.
CBOE:VXXShort
by NaughtyPines
ROLLING: VXX FEBRUARY 21ST 14/16 SCV TO MARCH 20TH 12/14 SCV... for a .41/contract credit and for a realized gain of .34/contract. Notes: My preference would be to roll these down on strength, but staying mechanical and rolling out at 50% max of credit received. Total credits received now at 1.09/contract, so the roll also has the salutory effect of actually reducing setup risk; the max loss metric was previously 1.32/contract, and now it's .91. To some, the short call might appear "too deep" in the money, but VXX (on average) loses about 6% of its value per month, so it's conceivable that if there are no major pops here that VXX could trundle down to sub-12 in the next 60 days. Naturally, if we do get a pop, I'll add units and go from there ... .
CBOE:VXXShort
by NaughtyPines
OPENING: VXX FEBRUARY 21ST 15/16 SHORT CALL VERTICAL... for a .33/contract credit. Notes: My 2020 short volatility starter position, collecting one-third the width of the spread. The natural alternative is to go with the 14/17, which also pays one-third, but I'm not picking a hugely fabulous spot to start this with VIX at 13.85, so going the narrow route and small with the number of contracts. Will manage this organically: (a) rolling down/down and out as a unit to at-the-money on approaching worthless; (b) rolling out and widening if necessary to force a credit on a pop; and (c) narrowing the spread post-widening when that becomes opportune.
CBOE:VXXShort
by NaughtyPines
3
VIX DEC 18TH 16/20 SHORT CALL VERTICAL (CONT'D)This is a continuation of a trade I started in July as a VIX "Term Structure" trade with a current scratch of 1.93/contract and a break even of 17.93. (See Post Below). My original thought process was "the usual" -- look to take profit at 50% max. With the spread currently valued at .65 at the mid, I would ordinarily do that here, but am going to continue to roll the spread out as a unit for additional credit/cost basis reduction, since I'm in and out of this basic play a lot of the time anyhow. One option I'll naturally look at if volatility hangs in there at these low levels running into expiry is to roll the spread out for a credit while simultaneously narrowing the width of the spread to reduce risk, reserving "widening" of the spread for periods of higher volatility when it may be necessary to widen the spread to receive a credit on roll because volatility has yet to mean revert within the lifetime of the spread For example, I can currently roll from the December 16/20 to the February 16/19 for a .40 credit, simultaneously improving my break even from 17.93 to 18.33 and reducing risk from 4 (the width of the spread) - 1.93 (credits received) = 2.07 to 3 (the width of the new spread) - 2.33 (credits received) or .67. Naturally, what I do will depend on what happens between now and expiry ... .
TVC:VIXShort
by NaughtyPines
THE WEEK AHEAD: GDXJ, IWM, VIXEARNINGS No options highly liquid underlying earnings announcements this coming week. EXCHANGE-TRADED FUNDS Ordered by implied volatility rank: SLV (80/27) GDXJ (74/39) GDX (72/33) GLD (76/13) TLT (62/16) XOP (43/40) Precious metals and miners still hanging in there another week with high rank/high implied with GDXJ presenting the best rank/implied metrics of >50 rank/>35% implied. The GDXJ Oct 36/47 short strangle pays 1.13 with break evens of 34.87/48.13 and delta/theta metrics of -5.28/3.06. BROAD MARKET IWM (37/22) SPY (37/19) FXI (33/22) DIA (30/18) QQQ (29/22) EEM (28/20) EFA (22/14) Pictured here is an IWM Feb 21st 125/173 ratio'd short strangle with the short put at the 14 delta and the short calls at the 7 delta -- doubled up to accommodate put side skew. It's paying 3.04 at the mid price as of Friday close, with break evens at 121.96/174.52 and delta/theta of -.61/2.89. An example of a defined risk counterpart would be the 115/125/2 x 173/2 x 178 iron condor, paying 1.51 at the mid price with 123.49/173.76 break evens, and delta/theta metrics of -.45/1.00. VIX/VIX DERIVATIVES VIX finished on Friday at 18.98 with the notable characteristic of the /VX term structure being that everything but for the September contract is lower than where October is trading. Consequently, the September or October expiries would be amenable to a term structure trade, with a short call vertical or long put vertical set up with a break even at or above where the corresponding /VX contract is trading. Because the September /VX contract was trading below spot as of Friday close (18.84 versus 18.98 spot) and there's only 16 days 'til expiry, I'd probably opt for October to set this up. Both the VIX Oct 19/21 short call vertical, .65 credit, break even at 19.65 and the 18/21 short call vertical, 1.10 credit, break even at 19.10 would fit the bill, with the October /VX trading at 19.20 as of Friday close. With VXX and UVXY, continue to look to leg into bearish assumption spreads on VIX pops to >20 with spread break evens at or above where the underlying is currently trading.
AMEX:IWM
by NaughtyPines
THE WEEK AHEAD: ROKU EARNINGS; GDXJ; VXX, UVXYA real quick and dirty here between checking off items on the honey-do list ... . Here's the cream of the crop: ROKU (83/94) announces earnings on Wednesday after market close and with rank/implied greater than 70/50, it's an ideal play for volatility contraction post-announcement. The pictured setup is a September 20th 75/80/135/140 iron condor, paying 1.67 at the mid price (one-third the width of the wings). Look to take profit at 50% max (.83/$83 assuming a mid price fill). Taking the top spot again this week for rank/implied among the exchange-traded funds is GDXJ (92/37) with the >70% probability of profit September 20th 36/45 short strangle paying 1.31 (.75/$75 at 50% max) and delta/theta metrics of 2.02/3.16. Lastly, with the pop in volatility last week, consider a bearish assumption play in either VXX or UVXY (i.e., either short call verticals or long put verticals) with the short leg in the money, the long out and that pays at least one-third of your spread in credit (or for which you have to pay less than two-thirds the width in debit). For example, the VXX Sept 20th 25/27 short call vertical is paying .67 at the mid price with a break even at 25.67. Conversely, the VXX Sept 25/27 long put vertical costs 1.36 to put on with a 25.64 break even and a max profit potential similar to that of the same-strike short call vertical (.64/$64). For the bolder at heart, the VXX Sept 22/24 long put vertical costs .95 to put on, making it a risk one/make proposition on the notion that volatility implodes fairly quickly back to its pre-pop levels, taking the VIX derivatives with it.
NASDAQ:ROKU
by NaughtyPines
BUY USDJPY: SUP LEVEL @105.5 & VOLATILITY SELL-OFF @ HIGH LEVELSBUY USDJPY @106.5 or @107.0 - SL @105 - TP @109-11 based on: $YEN's historical most important support level - The 105.5 Key level will more than likely hold as it has many times before - At 105.5 there are 3 significant UNSUCCESSFUL tests of the level over the last 3 years thus it is a great entry point. Also another plus is if you look at the monthly chart you will notice 105.5 is the 2nd most important level in $Yen's 20y+ history, the 1st most important/tested is the 101 level. - Further, over the last 3 years the level has been tested 4 times in total and it only broke once when USDJPY rose to 127 so that means LONG at this level has a 75% chance of success (based on the simple discrete math). - Plus, around 105.5 at 106 and 106.5 these also provide "mini" strong support levels which i think are great, low risk entry points for long positions. Normal Distribution and High Price Standard Deviation Volatility - as you can see the weekly bar has closed below the 5 year -3SD (and -2SD 2.5year) once before, by the red bar 5 weeks ago which was also at the 105.5 support level- at which point USDJPY0.02% rallied back up to 111.5 from 105.5 after closing below the -3SD and -2SD line and on the 105.5 so we could see topside like this again. - in addition to this, it is worth noting that the 5y -3SD blue line that was violated but rejected 5 weeks ago and is being tested again, based on normal distribution theory, says that prices touching this line have a 99.5% probability of reverting BACK UP towards the mean at 122.5. The -2SD 2.5year line that was also violated has a 95% probability of retracing up towards the mean at 126. Historical and implied volatility at all time highs - a reversal - Historical volatility across the board (5,10,20,30,60) is trading at all time high levels now and at some point these levels have to come down, investors cant keep pushing vols higher, which in turn, means selling of UJ must come to an end soon and we should see an upward recovery run. - The same is true about Implied vols which are trading at 15.75% which is in the (upper) 90th percentile of the last 2.5 years of days, meaning implied vols 90% of the time have been lower than this - thus a reversal is more likely at these levels. HV is likely in the 90%tile or greater also - Usually a sell-off in volatility precedes buying of UJ. - See more info on vols here: www.tradingfloor.com Downside analysis 1. The obvious risk of the Long UJ play are that the 105.5 level doesn't hold, in which case i believe the long squeeze caused, as a result of all long SLs being hit causing a cascade of selling could take us down to 102/3 - however this is easily avoided by keeping tight stops at 104.5-`105 dependent on your risk appetite. - even with a 150pip SL it still returns us 3x returns with a TP target of 111+ 2. The markets may trade risk off in the coming weeks as the macroeconomic envrionment is filled with uncertainty e.g. FOMC, BOJ and UK EU Referendum, in which these events are compounded by the fact that risk markets (spx etc) are currently trading at all time highs, making a reversal in their direction and risk-off tone more likely. Furthermore other risk-off assets such as Gold and Bonds are trading well. All of which may combine into a strong risk off environment that fuels the JPY follow the bullish trend with its counterparts (bonds and gold) and enabling UJ to push past the 105 strong hold. - However, these issues are all displaced by a tight SL as advised at 104.9 (to benefit from the 105 key lvl supporrt potential)
Long
by QuantumLogicTrading
4