If you’re thinking about trading VIX options or futures, this 16-minute video will arm you with essential information about these widely-misunderstood and confusing contracts.
One correction: Thanks to Bill Luby at vixandmore.blogspot.com/ for pointing out that VIX futures were introduced before VIX options.
Thank you for that very clear explanation.
[...] bear market, when there are somewhat clear economic signals that stock prices should rise or fall, the VIX is rather low – since people feel relatively certain about the overall direction of the market. Note [...]
Great explanation. Thank you very much.
MAteMA
[...] See Dean Mouscher in MasterOptions.com [...]
Dean; not many people will take the time to explain those details to the retail public, nice job.
i happen to trade vix future switches and am always looking for good hedges to long and short spreads. after spending much time modeling hedges with vix ops or es futures; i have come to the conclusion that well placed trades and properly working short spreads against long spreads is my best hedge at this time. i also trade convergence when i see the opportunity. if you have any other input that i could look at in my type of trading; i’ll be all ears. thanks again.
I also noticed the ultra high implied volatility of the VIX options. I rationalized the phenomenon that since VIX is not tradable, and its closest sibling, the future, does not track its performance well, the implied vol ought to be huge to compensate for the risk of writing options.
Thanks for your information.
Thanks Dean. Much appreciated. You made it very clear. I was under the impression that options are based on cash VIX.
Please keep it up. You are doing a valuable service.
[...] some ViX swimwear. Or if you prefer….an excellent description of VIX trading products via Masteroptions.com. Hat tip [...]
Thanks for the video Dean,
I’ve not traded these VIX options, but someone did show me a graph of disparity between the IVs of puts and call (as per your Think and Swim example). I couldn’t believe it and thought there must be something seriously amiss.
You’ve explained very clearly where it is.
Cheers,
Wayne