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VXX

VIX Highest Level Since 2008Level of volatility was at the highest level since 2008 on Monday. This coincide with the fastest 20% decline in the market history. Where the market has never seen this level of volatility and speed of decline since the Great Financial Crisis. Despite this extreme move, some might speculate that the market will bottom soon evident with the peak caused by the crash on Monday. However, this is a very risky speculation as the VIX measures that rate of change not the level of gains or decline. In other words, the S&P500 can still decline by 5% in the coming week with the VIX barely moving. On the other hand, if the VIX declines sharply, it can be interpreted by traders and the market that a bottomed is reached.
CBOE:VIXShort
by EmpowerTrader
4
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
THE WEEK AHEAD: TGT EARNINGS; XLE, XOP, EEM PREMIUM SELLINGEARNINGS: TGT (93/52) and COST (91/44) announce earnings next week, with a directionally neutral TGT short strangle shown here paying 3.87 at the mid price, delta/theta 1.01/9.64. EXCHANGE-TRADED FUNDS ORDERED BY RANK AND SHOWING THE FIRST EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS GREATER THAN 10% OF THE STOCK PRICE: XLE (99/55), April XOP (97/79), April XMH (95/54), April FXI (95/40), May GDXJ (95/50), April EWW (95/43), April USO (91/48), April EWZ (90/48), April GDX (89/46), April XLU (88/26), June BROAD MARKET ORDERED BY RANK AND SHOWING THE FIRST EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS GREATER THAN 10% OF THE STOCK PRICE: EFA (100/38), June EEM (95/44), April IWM (88/42), April QQQ (83/47), April SPY (80/42), May FUTURES ORDERED BY RANK: /GC (100/20) /ES (113/40) /CL (100/51) /ZC (68/18) /SI (68/28) /NG (67/49) /ZW (11/28) VIX/VIX DERIVATES: VIX finished the week at a whopping 40.11 with the /VX term structure in backwardation, so it's an opportunity to add short call verticals or long put verticals in VXX and UVXY if you haven't already done so. For existing spreads (I've got a few), I'll be looking to play the elevator up/down game, rolling the long call aspect of my VXX credit spreads up to lock in profit on that side of the trade and improve my break even. In all likelihood, these will eventually require rolling out for duration come April opex due to the location of the short leg, but I'm fine with that. Pops can happen while you have these on, and you just need to be patient and make the best of them ... . GENERAL MUSINGS: For people who are into selling premium and who had large amounts of cash sitting on the sidelines, this is your "kid in a candy store" moment. Non-single name premium selling has finally become productive in that 45 day wheel house, even in broad market, where we were looking at going grotesquely long in duration last week to get paid. For those who had longer-dated premium selling setups on before this volatility expansion (points at self), well, I feel your pain. Be patient and mechanical, and some of that pain will inevitably give way to a volatility contraction going forward.
NYSE:TGT
by NaughtyPines
1
THE WEEK AHEAD: DBX, TECK EARNINGS; USO, GDXJ; VIX, VXX, UVXYEARNINGS: The earnings that are best metrically for earnings-related volatility contraction plays are DISH (87/59), TECK (87/52), and DBX (82/57). Unfortunately, strike availability in DISH is limited to two-and-a-half wides, making it an unattractive play given its stock price (39.97 as of Friday close). Pictured here is a DBX (82/57) skinny short strangle in the March cycle paying 1.98 on a buying power effect of about 3.25 (60.9%), break evens wide of the expected move, and delta/theta of 3.32/-7.44. Given its near-straddle narrowness, I would look to take profit at 25% max. Announcing on Thursday after market close, look to put on something in the waning hours of Thursday's session. The other one of interest is also small: TECK (87/52), which finished the week at 13.46. A play similar to that in DBX -- a March 20th 13/14 skinny short strangle -- pays 1.15 at the mid price on a buying power effect of about 2.25 (51.1%) with break evens greater than the expected move and delta/theta metrics of -4.21/2.17. As with the DBX skinny, look to take profit at 25% max. EXCHANGE-TRADED FUNDS WITH EXPIRY IN WHICH AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE: XLE (46/20), July USO (42/35), April FXI (35/21), August XOP (34/34), June XBI (34/27), June SMH (30/25), June EWZ (14/25), June GDXJ (5/28), May GDX (4/23), June The paying plays of shortest duration are in USO (April) and GDXJ (May). Take your pick in June between XOP, XBI, SMH, and EWZ. BROAD MARKET FUNDS WITH EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE: EEM (38/12), December QQQ (26/18), September EEM (23/18), September IWM (19/16), October SPY (16/13), November FUTURES (EXCLUDING CURRENCY/TREASURIES): /NG (52/39) /CL (41/35) /GC (26/11) /ZS (23/17) /ZW (20/21) /ZC (16/14) /ES (16/14) /SI (5/24) VIX/VIX DERIVATIVES: VIX finished the week at 13.68, so there are probably some happy campers out there who shorted the January-end volatility pop to nearly 20. The March, April, and May /VX contracts are trading at 15.40, 16.11, and 16.30, respectively. I could see going small with an April term structure trade if you haven't already got one on, but May isn't going for a ginormous premium over April, so there probably isn't much benefit to going out farther in time: the April 16/18 is paying .60 at the mid with a break even of 16.60 versus the /VX contract of 16.11; the May 16/20, virtually the same price. With the VXX short call verticals I already have on, I'm basically looking for a VIX low (it was around 12) to consider pulling some units off in profit. On the other end of the stick, I'm waiting for another pop in VIX to potentially add. VIX at 20 is a nice place to look to do that ... .
NASDAQ:DBX
by NaughtyPines
THE WEEK AHEAD: TWTR EARNINGS; FXI, USO, XOP; VIX, VXX, UVXYEARNINGS: TWTR (66/54) announces earnings on Thursday before market open, so look to put on a play in the waning hours of Wednesday's New York session to take advantage of post-announcement volatility crush. Pictured here is a 16 delta short strangle in the March cycle with -2.88/2.95 delta/theta metrics and break evens wide of the expected move paying 1.10. There are naturally a number of other earnings announcing next week (i.e., DIS, SNAP), but TWTR has the best implied volatility rank/30-day implied metrics to set up for a volatility contraction play. EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK WITH FIRST MONTH IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS GREATER THAN 10% OF THE STOCK PRICE: FXI (86/30), June USO (72/41), March XLE (72/33), May SMH (68/29), May XOP (56/38), March IBB (56/25), June EWZ (50/30), April GDX (30/31), May GDX (27/27), May BROAD MARKET FUNDS ORDERED BY IMPLIED VOLATILITY RANK WITH THE FIRST MONTH IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS GREATER THAN 10% OF THE STOCK PRICE: EEM (62/23), September EFA (60/15), December IWM (54/20), August QQQ (51/22), September SPY (50/18), October FUTURES (EXCLUDING CURRENCIES AND TREASURIES) ORDERED BY IMPLIED VOLATILITY RANK: /CL (64/42) /GC (47/13) /SI (38/21) /ZC (32/20) /NG (29/40) /ZS (18/18) /ZW (7/24) VIX/VIX DERIVATIVES: VIX finished the week at 18.84 with months 1-3 in backwardation; February finished at 18.30, March at 17.80, and April at 17.83. Here, I would add short volatility spreads in either VXX or UVXY, looking to collect one-third the width of the spread in credit (for short call verticals) or not pay more than one-third the width of the spread in debit (for long put verticals) (e.g., the VXX March 20th 16/17 short call vertical, paying .34).
NYSE:TWTR
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
THE WEEK AHEAD: NFLX EARNINGS; XME, GDXJ/GDX, XBI; VIXEARNINGS: NFLX (46/41) (Tuesday After Market Close). The metrics aren't ideal here, with the rank below 70%, the 30-day below 50% and the at-the-money short straddle paying less than 10% of the value of the underlying in the February cycle, but this is the best of the bunch announcing next week in terms of both liquidity and implied volatility. Pictured here is a February cycle 305/385 delta neutral short strangle paying 7.00 with delta/theta metrics of .84/27.72. Alternatively, go defined risk, shooting to collect one-third the width of the wings with a 305/310/380/385 iron condor paying 1.88 with delta/theta of .70/3.48. I will consider going out farther In time to March to get paid, but the trade-off is that any volatility crush gets muted if you do that. That being said, you do get wider break evens for a similarly delta'd short strangle, so get more room to be wrong. For instance, the similarly delta'd March setup is the 295/395 paying 8.13 at the mid price with delta/theta metrics of -.91/18.54, with break evens of 286.87/403.13 versus the shorter duration's 298/392. EXCHANGE-TRADED FUNDS: ... ordered by rank and showing the month in which the at-the-money short straddle pays greater than 10% of the value of the underlying. I've culled out funds that aren't paying that in 180 days' duration or less, since no one likes to wait that long for their candy. XME (30/21), June GDXJ (17/28), May XBI (12/24), June GDX (11/25), April USO (11/29), April XLE (6/16), July SMH (4/21), May EWZ (3/24), June XOP (2/28), April* I've already got GDX, EWZ, XBI, and XOP on, so may look at getting into some XME, even though there is some overlap with miner holdings, and/or redipping my stick into some SMH, since that pays in a shorter duration. BROAD MARKET: Nothing is paying in <180 day duration .... . FUTURES (EXCLUDING TREASURIES AND CURRENCIES): /NG (39/42) /GC (29/11) /ZC (29/24) /SI (28/18) /CL (23/28) /ES (10/12) /ZW (8/23) Natty is juiced with last week's sell-off, with some understandable trade-related friskiness in the ag complex. Oil's still paying, but only in durations of April or longer. VIX/VIX DERIVATIVES: VIX finished the week levitating a dime above the 12 handle with only the April, May, and June /VX contracts paying greater than 16 (16.05, 16.33, and 16.75, respectively). My general preference for term structure trades is to short only in expiries where the correspondent /VX future is trading above 16 and ordinarily in <90 day duration (e.g., the VIX April 15th 16/18, 87 days 'til expiry, .55 at the mid price with a break even of 16.55 versus the the /VX April contract of 16.05), so would probably only pull the trigger on an April setup. For UVXY and VXX, my short volatility go-to's, I'm patiently waiting for a pop to add and/or to roll what I've got into strength, of which we've had very little. VXX was down 5.67% for the week; UVXY, 8.37%. * -- There isn't an April expiry as of the writing of this post, but January fell off last week, so one will likely be opened and populate this week.
NASDAQ:NFLX
by NaughtyPines
THE WEEK AHEAD: USO, EWZ, XLF; VIX/VIX DERIVATIVESEARNINGS: Earnings kick off in earnest this week with a bevy of financials (WFC, GS, JPM, C, BAC, MS). Generally speaking, I haven't played these in the past due to low background implied, and nothing has changed in that regard this go-around from a premium selling standpoint: WFC (30/21), GS (27/24), JPM (20/21), C (16/23), BAC (0/22), MS (0/24). That being said, it looks like the financial sector exchange-traded fund XLF (5/16) has put in a multi-year double-top, so I could see taking a bearish assumption directional shot on the notion that earnings in this sector may disappoint in a low interest rate environment. For example, the XLF February 21st 30/32 long put vertical costs 1.04/contract to put on, has a max loss metric of .96 and a break even of 30.96 versus a Friday close of 30.69, which are the kind of the risk one to make one/break even at/near where the underlying is currently trading metrics I like to see out of these. EXCHANGE-TRADED FUNDS WITH THE FIRST EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS >10% OF STOCK PRICE: UNG (36/40), February SLV (33/20), July USO (32/32), April EWZ (29/26), June GLD (26/12), January '21 Pictured here is an EWZ 20-delta short strangle set up in the first expiry in which the at-the-money short straddle is paying greater than 10% of the stock price, 1.91 credit, delta/theta 0/1.41. Although I would ordinarily go with the underlying paying in the shortest duration, we will start to run into seasonality issues with UNG in the February or March cycles (depending, of course, on Mother Nature), so would rather not hit that underlying non directionally here. And USO can be somewhat of a pain to trade due to its smallness. BROAD MARKET WITH THE FIRST EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS >10% OF STOCK PRICE: EEM (66/16), September EFA (20/11), December SPY (14/12), November QQQ (9/17), September IWM (0/15), September Well, we're in a volatility lull here, so this comes as no surprise that shorter duration isn't paying. VIX/VIX DERIVATIVES: VIX finished the week at 12.56, with the March, April, and May /VX contracts trading at 16.04, 16.56, and 16.80, respectively, so term structure trades remain viable in those months. VXX and UVXY -- my go-to derivatives instruments -- both hit new 52 week lows last week, and VXX finished the week at 14.12, UVXY at 11.59. Although VIX has room to trundle lower from here, it probably wouldn't be a bad thing to pull off a few units in profit put on higher up the ladder and then wait for the next >25% pop in VIX (which would be a modest pop at 16 or so) to start legging back in.
AMEX:EWZ
by NaughtyPines
2
The creeping VIX-just what the fed orderedSlow & boring-just what the fed ordered (or printed). Our manufacturing data may be in the dumps but we're sure good at manufacturing lies and artificial markets. Volatility coiling up-watch for possible wave to (D) before retracement/sideways movement to (E). I want a solid test of upper trend line-Vix could blow through the roof or coil up for months until after apex of this triangle. For now, they're keeping a tight lid on this.. The circus is in town and we're all in it. (renko blocks not playable from tradingview ideas window - I'll update this idea by posting snapshots as price moves along or when I feel something significant is happening)
TVC:VIXLong
by gghsusa
2
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
OPENING: VXX 14/15 JANUARY 17TH ZEBRAWith VIX hovering around 2019 lows, re-upping with another "Zebra" ... . Metrics: Max Profit: Undefined Max Loss: $221/setup Break Even: 15.23 Delta/Theta: 85.16/-1.07 Notes: There are several different ways to look at this trade: (a) as a long call vertical + an additional long call; (b) long calls, the cost of which is cut by selling a short against; or (c) a synthetic long stock position (at least on setup, since its delta is dynamic). In any event, looking for a pop between now and expiry. Take profit on these is subjective, since it's awfully hard to tell when VIX has topped out and max profit in the setup is "theoretically infinite" due to the additional long call present in the spread.
CBOE:VXXLong
by NaughtyPines
5
THE WEEK AHEAD: CHWY, LULU, COST, ORCL EARNINGS; EEM, VIXEARNINGS: It's a fairly light week for earnings, but there is some highly liquid underlyings to play for volatility contraction: CHWY (--/74): Monday, After Market Close. LULU (64/42): Wednesday After Market Close. COST (44/23): Thursday, After Market Close. ORCL (42/26): Thursday, After Market Close. Pictured here is a CHWY January 17th 21 short put at the 20 delta, paying .78 at the mid price as of Friday close with a 20.22 break even. In this particular case, I'm not looking to play earnings for volatility contraction, but waiting for earnings to pass, as well as lock up to end, which is supposed to occur on the 11th (Wednesday) with a whopping 83% of outstanding shares subject to lockup. Depending on what happens with the share price at the end of lock up, as well as implied volatility, I will look to put on a play thereafter. The only other play I'm potentially interested in is LULU, where the January 17th 190/200/260/270 iron condor is paying 2.61 with delta/theta metrics of -1.69/5.35. It's not a one-third the width setup, but LULU has had a tendency to move, so my inclination would be to go wider to stay clear of potential friskiness. EXCHANGE-TRADED FUNDS: UNG (55/54) TLT (44/13) USO (21/30) GLD (19/10) GDXJ (18/27) With the possible exception of UNG, shorter duration premium selling isn't ideal here, with rank below 50% and 30-day below 35%. As an interesting aside, however -- compare and contrast premium selling in UNG and USO versus trading /NG and /CL directly, using at-the-money short straddle pricing: UNG January At-the-Money Short Straddle: 2.68 versus 18.03 (14.9%) /NG January At-the-Money Short Straddle: .309 versus 2.25 (13.1%) USO April At-the-Money Short Straddle: 1.75 versus 12.32 (14.2%) /CL March At-the-Money Short Straddle: 6.76 versus 59.07 (11.4%) BROAD MARKET: EEM (8/16) QQQ (7/16) IWM (6/16) SPY (2/13) First Expiries in Which At-the-Money Short Straddle Credit Exceeds 10% of Value of Underlying: EEM: June: --4.48 versus 43.07 (10.4%) QQQ: June -- 21.49 versus 205.00 (10.5%) IWM: September -- 20.05 versus 162.83 (12.3%) SPY: September 34.46 versus 314.87 (10.9%) As with the exchange-traded funds, short duration premium selling isn't paying here, so your choices are to hand sit or sell in higher implied volatility expiries farther out in time. I've been largely opting for the latter, while simultaneously exercising some restraint as to sizing, since the last thing you want to do is tie up buying power with longer-dated setups, only to have literally nothing left over to take advantage of shorter duration volatility pops. Secondarily, I've been managing these longer-dated setups more aggressively, taking them off in profit in many cases a good deal short of 50% max. FUTURES: /6B (60/12) /NG (55/58) /CL (21/29) /6E (20/5) /GC (19/10) As with the exchanged-traded funds, volatility is in natty and oil with /NG paying in short duration (January). One thing I noticed is that /CL expiry-specific premium selling doesn't necessarily lend itself to going longer-dated (at least at this moment in time) since implied is about the same regardless of where you go (i.e., January: 28.9%; February: 29.5%; March: 29.3%), so all you're basically getting paid for is duration, as compared to -- for example -- expiry-specific implied in SPY, which generally increases incrementally over time (i.e., January: 14.5%; February: 15.7%; March: 16.8%, etc.). This is not necessarily a bad thing, just an observation of what you're getting by going out farther in time with /CL options versus other instruments that have a sort of expiry-specific implied volatility "term structure." VIX/VIX DERIVATIVES: VIX finished Friday at 13.62, with /VX futures contracts trading at 16.32, 17.51, 17.63, and 18.19 in January, February, March, and April respectively. Consequently, the contango environment remains productive for term structure trades in those expiries, although it's apparent that you won't get much trading February over January due to the fairly small differential between where those two contracts are trading at the moment. In practical terms, the February 17/19 short call vertical is paying .65 with a 17.65 break even versus 17.51; the March 17/19, .65, with a 17.65 versus 17.63. In other words, it doesn't pay to go longer in duration (February versus March) here ... . As before, I'll look to put on bullish assumption plays in VXX or UVXY at extreme lows (these setups don't work well in VIX directly due to /VX term structure) and add bearish assumption in VIX, VXX, and/or UVXY on VIX pops to greater than 20 on top of any VIX term structure trades that I'm working ... .
NYSE:CHWY
by NaughtyPines
OPENING: VXX DEC 20TH 16/18 "ZEBRA"I've dicked around long enough waiting to put something on at or near VIX lows, and I like this particular setup here, although I obviously didn't catch things at VIX lows. Metrics: Max Profit: Undefined/Infinite Max Loss: 3.03 ($303) Break Even: 17.51 versus 17.57 spot Delta: 98.9 Theta: -.83 Notes: With the classic "Zebra", you're looking for a setup in which the short option "pays for" all of the extrinsic in the longs, resulting in a break even at or below where the underlying is currently trading. Given the delta metric, you're basically in synthetic long stock. The max profit is "theoretically infinite," with the long call vertical aspect of the setup converging on max at >18 and the additional long call converging on an instrinsic value where the underlying is trading. Naturally, a monstrous pop would be nice, but will probably money, take, run at the earliest opportunity. From a trade management standpoint, this is basically "unmanaged" -- i.e., it works or it doesn't ... .
CBOE:VXXLong
by NaughtyPines
4
Where to sell VXX hedgesMembers of Fundamental Trends recently took hedging positions using $VXX. Some own short-term VXX calls, others the VXX ETN. A very simple analysis of the VIX index shows that a target range for a rise in volatility would be about 18-25 on that index. Using simple Bollinger Bands and exponential moving average is all it takes along with a knowledge of history. Our plan is to start scaling out of positions by selling every couple points starting at 18 for VIX and the corresponding prices for VXX. This was the prelude to opening this trade a week ago: Hedging and shorting are incredibly difficult to do. That's not only due to having to be very good at picking spots, but the securities work against you the longer you hold.  For most people hedging and shorting is a bad idea. While you can hit home runs doing it, there are a lot of strikeouts. Think Dave Kingman if you're an old time baseball fan. He hit some home runs, but also struckout a lot. He was actually one of the first "launch angle" hitters without even knowing it. And, he did not end up in the Hall of Fame - like most short investors and hedge fund wannabes. 
CBOE:VIXLong
by Kirk_Spano