4 Apr TG2...VIX Calls: charting beta of VIX futures to the VIX

Discussion in 'General Discussion' started by KiwiDon, Apr 6, 2017.

  1. KiwiDon

    KiwiDon Well-Known Member

  2. KiwiDon

    KiwiDon Well-Known Member

    a bit more info...
    Vince Harwood over at sixfigureinvesting.com has a more detailed discussion on the above chart.... https://sixfigureinvesting.com/2010/01/trading-vix-options/

    "While technically not the actual underlying, VIX futures act as if they were the underlying for VIX options—the options prices do not track the VIX particularly well.

    A big spike on the VIX will be underrepresented, and likewise a big drop probably will not be closely tracked. This is a huge deal. It is very frustrating to predict the behavior of the market, and not be able to cash in on it.

    The only time the VIX options and VIX are guaranteed to sort-of match is on the morning of expiration—and even then they can be different by a couple of percent. The closer the VIX future and the associated VIX option are to expiration, the closer they will track the VIX. With the CBOE’s introduction of VIX weekly options there should always be options available with less than a week to expiration."
    .....also this bit is interesting:

    The CBOE reports that trading hours are: 9:30am to 4:15pm Eastern time, but in reality the options do not trade until after the first VIX “print”-when the VIX value is calculated from the first SPX options transactions. The first VIX quote of the day is usually at least a minute after opening.​
    Last edited: Apr 8, 2017
  3. David Stewart

    David Stewart Well-Known Member

    I basically think of the beta as you have called it as the delta of the ATM options, notice that at around 19 or 20 days to expiration they are at about a 50 delta, this also corresponds to Brian Johnson's new book where he shows a similar chart and I think he shows the delta to be about 47 for an ATM option with 21 DTE for the corresponding future. Then the delta goes down about 15 to 32 out 30 days, then about half of that or 7.5 (25 delta) another 30 days, half again to about 3 (21 delta) or so another 30 days.
  4. KiwiDon

    KiwiDon Well-Known Member

    Thanks David for the info from Brian....I just had a look on Amazon...is this the new book you are referring to?...looks interesting (plus I see he's put up some instructional videos on his website: https://traderedge.net/ ):

    Last edited: Apr 10, 2017
  5. David Stewart

    David Stewart Well-Known Member

    Yes KiwiDon, that is the new book, not sure I'd recommend spending 15 bucks on it, but I did and found it to be pretty basic stuff. But some may find it quite useful. One problem for example that I had with it was the resting limit future contract sell order for a market downturn. By definition a hedge is put on at about the same time as the position itself, where as the example he gives he sells the emini after the fact so to speak. Then if the market keeps moving down you are glad you did it but it's not really a hedge in my thinking. But all in all a decent read and I have not fooled around with the spreadsheets he gives the reader access to but may look at them this upcoming week. He also writes in a very dull formulaic style that is not exactly much fun to read. For those who have his earlier books you know what I mean. I could go on with some other problems I have with the text but I won't.

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