Current VIX Term Structure

Discussion in 'General Discussion' started by Ice101781, Aug 17, 2017.

  1. Ice101781

    Ice101781 Guest

    VIX_term_structure.png

    For those looking to put on >3 month trades soon, are you taking advantage of the current step function-like behavior in the VIX term structure? If so, how?
     
  2. Ice101781

    Ice101781 Guest

    Interesting that with spot VIX where it is, the market seems to be hedging for an overreaction today.
     
  3. Trader G

    Trader G Well-Known Member

    Last week we got in to backwardation on the down move I believe. Looks like we aren't quite there with this move:
    upload_2017-8-17_19-35-1.png
     
  4. Trader G

    Trader G Well-Known Member

    Sorry, meant to post this with 8/10
    upload_2017-8-17_19-37-56.png
     
  5. Marcas

    Marcas Well-Known Member

    Can you explain, pls.

    We may be not in bacwardation, but skew get steeper in contrast to drop from few days before where we had flattening (looking at 20 Oct and 17 Nov)
     
  6. Ice101781

    Ice101781 Guest

    In the chart, spot VIX is at 15.55 - the next four cycles are all in contango (with only slight backwardation between NOV and DEC) below that level - which itself is only historically average. I just think it's gonna take something big to really derail this thing. There's little yield anywhere else with rates so low (honestly surprised gold isn't higher despite the recent rally), The ECB and the BOJ are still providing global liquidity, recent earnings were very good, etc.
     
    Last edited by a moderator: Aug 18, 2017
  7. Ice101781

    Ice101781 Guest

    And while it's fun to speculate, I'm really more interested in talking about possible trade configurations that try to take advantage of this particular term structure.
     
  8. garyw

    garyw Well-Known Member

    Kinda tonge in cheek: If you suspect a numbness to, or a reduction in POTUS tweets, another long SVXY trade may be setting up. (ride the contango train)
    The exits, are less clear as drawdown may occur at a Tweet's notice.
     
  9. Marcas

    Marcas Well-Known Member

    Thanks Ice101781, I understand what you said but still fail to grasp why did you said about market hedging at this point. Is that because skew is steepening or you see something else in options chain structure (which one). Sorry for being so persistent, I'm just checking something.
     
  10. Ice101781

    Ice101781 Guest

    When I said "the market seems to be hedging for an overreaction today", I just meant that if the market really believed this Trump agenda thing was something to worry about over the next month or so, I'd expect all futures to be trading ahead of spot, but that's not the case. So, the market seems to be signaling an expected reversion of this recent fear back to the complacency that's become so familiar.
     
  11. Ice101781

    Ice101781 Guest

    Then again, who knows?
     
  12. Marcas

    Marcas Well-Known Member

    Got it.
    Let's see what tomorrow brings.
     
  13. Ice101781

    Ice101781 Guest

    it's a long shot, but in the SPX I'm hoping for a <-1% open from today's close. I've got a trade right on the cusp of profitability, but the options are the AUG monthlies so they're AM settled.
     
  14. status1

    status1 Well-Known Member

    I guess my loss is your gain
    I was hoping for a bounce this morning I was on the cusp on the other side
    It's amazing how yesterday it started a little down than it accelerated into the close 2SD to pin the tail right on the 2430
    I would have been ok and could have had a lot of profit if I had not adjusted my original trade but who knew that it would move 2 sd on the last trading day of the month It's Murphy's ;aw strikes again
    Anything that can go wrong will go wrong at the worst possible time
    It's horrible trading in this low iv market You have to get closer to to ATM to get a decent profit than the market throws into reverse and backs over you than it goes up again so my other trades don't make money either
    Oh well time to put on another trade next week after I find out how much I lost in this AM settlement
     
  15. Ice101781

    Ice101781 Guest

    Unfortunately, I didn't make any money either - the SPX Aug settlement number was around 2425, and I needed it to be at most 2405-2410. Frustrating indeed.
     
  16. PK

    PK Well-Known Member

    I guess that Bruce Lee would have been a great trader: "You must be shapeless, formless, like water. When you pour water in a cup, it becomes the cup. When you pour water in a bottle, it becomes the bottle. When you pour water in a teapot, it becomes the teapot. Water can drip and it can crash. Become like water my friend."
    In other words, do not interpret the market, do not blame the market, do not complain about the market, just centre on how to become the market (and profit from the markeet).
     
  17. Ice101781

    Ice101781 Guest

    Good advice for anyone working on their trading psychology. I find that I'm most balanced mentally when market direction isn't driving my profits - it's when I fail to control Delta that I find myself in these types of situations, hoping (ugh) for a desirable outcome. Maybe I need to change my name to Water101781.
     

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