Q puts, VIX calls

Last week, I mentioned I had added some options to the portfolio:  I had picked up some Q Puts and a few VIX Calls.

The VIX options — May $12.50 Calls, purchased out of the money — are working out nicely. They are now in the money and still have plenty of time left in them. I expect to either keep them open for a while, and perhaps roll them out to a later month.

The May $43 QQQQ puts are also working out. These are more of a trade, and depending on how we progress, may get closed over the next few weeks. It really depends if this is a consolidation (probable) or something more untoward (possible).

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  1. jkw commented on Apr 11

    Is there some advantage to trading QQQQ puts over MNX or NDX puts for short-term trades? Index options get favorable tax treatment as section 1256 contracts and have basically the same risk characteristics. They are also European-style so you can sell them without worrying about early exercise. Cash settlement seems better to me, although that depends on what else you are holding.

  2. thecynic commented on Apr 11

    are the vix options on the futures? do you have to have a futures account to trade?
    i was thinking they were at CBOE but not sure

  3. Bynocerus commented on Apr 11

    No advantage to trading Qs over NDX options. I think a lot of us are just used to trading the Qs, and since we’re creatures of habit, that’s what we trade.

    Reigning in those shorts now. Expecting some kind of bounce this PM. If we close on to the lows, I’ll be looking for a washout tomorrow.

  4. Mark commented on Apr 11


    Looking like you are going to get your wish. Dow off 85. “Washout” meaning …..?

  5. Bynocerus commented on Apr 11

    Washout meaning I thought we would get some kind of rally attempt tomorrow. Unfortunately, I just looked at the volume stats, and we’re selling off on pretty light volume. The big question is whether or not we’ll see the bulls return in force or whether we’ll see a surge in volume to the downside tomorrow followed by a washout Thursday or Monday. The S&P and DJIA are max oversold, but the Naz isn’t even close, and considering that the market can stay oversold, I’m gonna retract that previous post and say we may not get a rally till Thursday.

  6. rwbil commented on Apr 11


    I have to respectfully disagree with you somewhat on the VIX option play. When you first mentioned the trade, I thought it would be an interesting play, because I feel the market is due for a correction. So I put some of my mad money to work. And here is what I am experiencing. You have to be right big time to make money. Even though the VIX 12.50 Call is now in the money the option sells for less than it did when I bought them. You not only have a big drop in option premium price with the passing of time, but there is price drop based on price movement. As you get more into the money the premium part of the option becomes worth less. In fact, looking at the MAY 10 Call, it just traded for $3.00 with the VIX at $12.97, therefore there is no premium value being added to the May 10 call. Friday and today were big down days, yet the option is trading about the same price. I would need one or two more big down days just to break even. I paid about $1.50 when the VIX was around 11.50. The VIX is now around $13.00 and option is trading around $1.25. Next time I think I would buy an in the money call option with no premium, that way if I am right I am guaranteed to make money. With this trade I could be right on the pullback and still lose money unless the VIX continues to rise significantly.
    All thought appreciated.

  7. Mark commented on Apr 11

    Did the Bears forget that the closing bell is 4pm? Let the Bulls off the hook today!

  8. Get Long Vega commented on Apr 11

    Yessir, VIX options are priced with a ton of upside skew. Market makers are paranoid about a potential rip up in vol. Just watch your breakevens with VIX options like a hawk. Upside’s priced way fat.

    FYI: I believe there are now futures traded that give you exposure to variance swaps in index-land. Prolly not too liquid. Might be worth it to investigate, though.

    Also, careful with VIX futures, too. You’d think futures would have no gamma, i.e. are always 100 delta vs. cash. Not so. The VIX basis is way fat. Again, the floors are paranoid about a rip up in vol.

    Things will really get interesting when the VIX is 30. You can bet both the upside and the down side will be fat, then. As it stands now, the floors are saying, “Hey buddy, you can buy all the May 10 puts you want, we don’t care.” Again, it’s a “one-way path-dependency” issue in the underlying at this point. IMO that’ll change as the housing market implodes and the consumer begins it’s long and painful liquidation of debt. Perhaps EBAY is a buy? HAHAHAHAHAHAHA.

  9. muckdog commented on Apr 11

    Friday is a market hollandaise, so I think it’d be scarey being short should volume dry up as the week goes on. Expecting a bounce… but wondering about the election year and seasonal cycles.

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