This week we will continue our discussion of a popular option spread — the calendar spread which is also called a time spread or horizontal spread. It is a perfect time to do some serious thinking about your financial future. But I believe the likelihood of losing on this investment is extremely low. The beginning of the year is a traditional time for resolutions and goal-setting. Unfortunately, VXX is pretty expensive protection, and not just because of the 0. As always, I hope you guys enjoy these videos. So investors looking for some protection continue to flock to VXX.
Sep 15, · For those that want more information on the trading VXX options and VIX futures and options the CBOE is a treasure trove of information as is Jill's article 5 Misperceptions About VXX. With the price of VXX trending down most of the time, except for rare instances where there are large price spikes, a simple option strategy should Reviews:
As you can see, VXX does tend to revert to its day moving average over time. If you trade options, it makes sense to understand the value of VXX and how to trade it. Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.
On the other hand buying longer term puts is expensive. Your email address will not be published. Gordon Lewis January 30, 1 Comment. Subscribe If you enjoyed this article, subscribe to receive more just like it.
September 5, at Leave a Reply Cancel reply Your email address will not be published. Recent Posts Kroger Stock: VXX is one of the securities that we like to trade to play volitility, and because volatility was low, VXX was low, the [vix We're not going crazy long volatility, but what we did want to do is play it just a little bit long.
The way that we're doing that is with an iron condor, but we're skewing that iron condor just a little bit. Really, really close to the lows it's had over the last year and so we're just, anticipating that some time between now and expiration out in May, which is out here, that implied volatility goes higher at some point. Again, it's a little bit hard to trade implied volatility percentile with VXX because implied volatility percentile is tracking volatility, and VXX is volatility.
You can't really trade most of this stuff off of implied volatility percentile. That's a little bit difficult, I know we got a lot of questions on that, but we're not trading this, I know it does not meet our general requirements for implied volatility over the 25th percentile, but we are trading long volatility here so that's the direction that we want it to go. When you look at the analyze tab on where this position is, and actually let me just look at the actual trade tab here so you guys can see where our position is for May.
We really, ideally want the stock to be under 29, and we got a little bit closer and a little bit wider on the PUT side, and that's just how we set up the trade because it kind of fit the parameters that we were looking for. Risk profile wise, you can see this skewed iron condor that we have, now going in VXX. Here's the deal, the reason that we skewed it is because implied volatility could rise really, really quickly, and if it does, we stand to make a profit all the way until about We don't lose a ton of money because of the way that we've structured the trade if implied volatility goes through the roof.
If implied volatility continues to creep lower, it's going to do so at a very slow pace. That's why we feel a little bit comfortable to make our PUT spreads a little bit closer because we're familiar with volatility, we know it's already low, so if it does go lower, it's going creep and creep lower.
It's not going to just dramatically drop another five or 10 points. At this point, we've got a very nice window of opportunity between about 22 and about 30 that we ideally want to see VXX trade in between now and expiration. We're not hoping for a huge spike because we don't know when that's going to happen, but we're just playing some normalization in volatility up above the level that it's at right now between now and expiration.
The last trade that we had today was in USO. We have two iron butterflies going on USO right now. One in April, which we adjusted today and one in May, which we did not adjust, that one is going fine because USO's moving higher, exactly where we want it to go for May. That allowed us to take in a nice credit of 42 cents, that helps reduce our risk in case USO does continue to move higher between now and expiration.
Here's the deal, USO has definitely continued to move off of the lows and implied volatility's starting to head lower, that's all great stuff, both for April and May positions. We felt like because our position was ideally centered around 16, this is where we wanted USO to trade between now and April expiration, which is right here, this is that first dotted line on the chart.
It might not be as likely now that we're getting deeper and deeper into the trading month and the expiration cycle, so for USO here's what our position looks like for the April contract. It's now a little bit of that kind of unbalanced iron condor look, and you can see that we have got a little bit less risk now on the topside of our trade.
We're leaving much more risk to the bottom side of our trade because we're rolling up that PUT closer and closer to where the stock is trading right now. We can continue to do this if we want to, but the whole idea here is again, just to take in more and more credit that helps offset the total risk in the trade going from the beginning.
As always, I hope you guys enjoy these videos. If you have any comments or questions, please add them right below here, inside of the membership area on OptionAlpha. If you're watching this video somewhere else out there online or on YouTube, you just have to understand that this video and these alerts only go out to our members the same day.
You're getting them about 15 to 20 days after they're sent out to our members. The only way you can get real-time alerts and this video every single night that goes over all of our trades is to sign up for a membership at OptionAlpha. Until next time, happy trading. Kirk founded Option Alpha in early and currently serves as the Head Trader. Kirk currently lives in Pennsylvania USA with his beautiful wife and two daughters.
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What does VXX track? Ideally, VXX would track the CBOE’s VIX® index—the market’s de facto volatility indicator. However, since there are no investments available that directly track the VIX Barclays chose to track the next best choice: VIX futures. Most options chains that brokers provide assume the VIX index is the underlying security for the options, in reality, the appropriate volatility future contract should be used as the underlying. (e.g., for May options the May VIX futures are the underlying). Should You Be Trading VXX? One of the primary themes I like to discuss on this site is volatility. After all, you shouldn’t be trading options if you don’t at least have a basic understanding of why volatility is important to the financial markets.
The full video by Len Yates available on this site explains the VXX Trading system in its entirety. The heart of the trading system is our proprietary indicator, the Yates VXX Indicator (YVI), which is used to provide the entry . Posted in 10K Strategies, Earnings Announcement Options Strategy, Greeks, Last Minute Strategy, Lazy Way Strategy, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, STUDD Strategy: Short Term Under-Intrinsic Double Diagonal, SVXY, Terry's Tips Portfolios, VXX, Weekly Options | No Comments». Again, it's a little bit hard to trade implied volatility percentile with VXX because implied volatility percentile is tracking volatility, and VXX is volatility. You can't really trade most of this stuff off of implied volatility percentile. It doesn't work quite exactly that way with some of these volatility ETFs and indexes like VIX, et cetera.
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