Tony B: And rightfully so. Tony B: I'll look at it right now. Tom S: I know. This changes the risk profile of calendar spreads entirely. Then we charge you $700 for every [inaudible 00:11:09] Tom S: That's all it is. Tony B: You really wouldn't be able to do it any other way in VIX 'cause you wouldn't be able to tell... VIX futures calendar spreads represent a daily turnover above 500 million dollars, or roughly 20% of the total VIX futures trading volume. VIX options perform differently to regular options so keep that in mind. Every single day. So, despite having a vega of +0.83, the long calendar spread actually made money from the decrease in … Most calendar spreads are set up to have a one-month differential. Apple down $1.68 or so, $1.70. The VIX Index is based on real-time prices of options on the S&P 500 ® Index (SPX) and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility. I've actually seen way worse situations, but the takeaway from the segment is, with respect to VIX calendar spreads, that 14% of the trades resulted in losses greater than a debit paid. VIX calendar spreads are one of the trickiest plays in the option world, so much so that some brokers don't even allow them. End of cycle VIX futures spread trading. Tom S: What's cool about this is we were able to put a numerical number of $700 around this discussion of what risk is. We went to the day of VIX settlement which may or may not be the right thing to do but, again, very hard to do anything outside of settlement. The absolute worst. If Apple's down you must put the money into Netflix. Tony B: Mm-hmm (affirmative). Tom S: But I want to do it from 7:00 to 8:30, so we'll see what we can do. It's funny because the one time you wait, the next thing you know the stock's 73. Tony B: It closed. Tom S: Liz and Jenny, I think it's 1:30. Put up $700." Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. Tony B: Serum's come down a little bit. What was that call spread we did in there?  Even so, this being a straightforward calendar spread, it should be possible to trade the strategy in size at relative modest margin cost, making the strategy return highly attractive. The reason you have a larger amount of risk is that different /VX futures trade independently to one another.  The strategy applies a variety of trend-following and mean-reversion indicators to trade the spread on a daily basis. Excel automatically displays the DOM of the VIX futures reverse calendar spreads with the bid … Tony B: Mm-hmm (affirmative). We've done calendar spreads all over the place and we already know you can't do it in the VIX. We have two more skinny segments coming up. Each cycle of VIX options is essentially its own product. How the nature of the VIX gives added risk when trading Calendar Spreads! When trading a calendar spread using equity options, the most that you can lose is that amount of money you pay for the spread. Speculation, rather than information about changes in the slope of the volatility term structure, is the main driving force behind calendar … For now, we're just going to focus on the VIX 'cause it's the most prevalent of all the underlying products where calendar spreads can get you in a heap of doo-doo. Please read, Characteristics and Risks of Standardized Options, Risk Disclosure Statement for Futures and Options. The SPX is one of them as well. Even burdened with significant transaction cost assumptions the strategy performance looks impressive on several counts, notably a profit factor in excess of 300, a win rate of over 90% and a Sortino Ratio of over 6. Each VIX expiration is some time in the future that we're hoping something happens to the volatility. Moves in the front month can be massive with very little change in the back month - especially as the contract nears expiration and /VX more closely resembles the spot price (VIX). Don't break the place! Tom S: I don't mind covering that and getting into something else. You're so scary right now. Tom S: Yeah. tastyworks offers self-directed brokerage accounts to its customers. Tony B: Mm-hmm (affirmative). It would be nice if we could get a little downside fall. Based on the results, 14% of the trades resulted in losses greater than the debit paid. A VIX futures calendar spread involves buying a futures contract maturing in one month and selling another one maturing in a different month.  I decided to take a time out to experiment with a slower version of one of the trades, a calendar spread in VIX futures that trades  the spread on the front two contracts. Tony B: [chuckling 00:10:17] The chart shows the rolling, non adjusted front month and 2nd month VIX future. However, there are certain products which this is not the case. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Tom S: We shorted a call expiring in 27 to 34 days. All right, let's do it. Some good news... Tony B: Okay. Remember, this segment is designed to be a learning experience. Tom S: VIX options are traded under the same ticker. Please enable JavaScript to view the comments powered by Disqus. We got Nasdaq down a $1.50. Let me go back. Sign up to get our best stuff delivered to you daily and save videos you want to watch later. Tony B: Thomas, we're back my friend. tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. So, 7:00 o' clock this weekend on Sunday night. Tom S: No, it was only... Tom S: Yeah. A calendar spread takes advantage of the pricing differential that may start to develop between a front month option and a back month option. It's a stupid trade. tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. S&P 500 VIX Futures Spread prices and quotes. Quantitative Research and Trading © 2016-2018 All rights reserved. A strategy we consider in low volatility environments... You're listening to TastyTrade Live. I'm just looking through all the positions right now. Tom S: 50% of the time of we win. Why not? Tony B: Yup. The Cboe Volatility Index ® (VIX ® Index) is considered by many to be the world's premier barometer of equity market volatility. Hopefully it's okay today. Tom S: 15 points, for sure. © copyright 2013 – 2020 tastytrade. I have a lot of firsthand experience with this and the first thing we did... And these numbers are very accurate, because the first thing we did when we ran the brokerage firm was we went back and we studied... Caught them red-handed. Tom S: SMPs are down 275. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. But rather than say to people, "Don't trade this," just put a dollar number out there where it says, "This is what it costs to trade." I have been working on developing some high frequency spread strategies using Trading Technologies’ Algo Strategy Engine, which is extremely impressive (more on this in a later post). We figured out the VIX calendar risk was $700. Select VIX Institutional Research. Still too high. It's so funny, right? I think we sold it for 48 cents. tastytrade is a real financial network, producing 8 hours of live programming every weekday, Monday - Friday. Another example, the calendar spread was 20 cent credit, ended up being a $290 loser. Tony B: Yeah! The Nasdaq is up $4.00. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Tom S: Yeah, I like the fact that [inaudible 00:00:32] stock's down. Tony B: Home Depot has had a nice move down, down 85 cents. Tony B: Meanwhile, the Nasdaq's down a $1.00. We have a phone segment coming up. Modeling a spread strategy on a retail platform like Interactivebrokers or TradeStation is extremely challenging, due to the limitations of the platform and the Easylanguage programming language compared to professional platforms that are built for purpose, like TT’s XTrader and development tools like ADL. They didn't know what real risk was around VIX. [chuckling 00:12:26] Went red for a second. It's 33 cents. We went back to June of 2008 to present. Either it contracts or expands but it all has to take place prior to a specific date. I'm not sure that everybody always grasped the way we explained it before. A calendar spread consists of buying or selling a call or put of one expiration and doing the opposite in a later expiration. Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails. The guys find out that 14% of the time the loss on the calendar was higher than the debit paid. On normal equities, calendar spreads are defined risk trades, as the max loss for a calendar spread is the debit that you pay for the trade. Tony B: Mm-hmm (affirmative). All Rights Reserved. Tony B: What are you doing over there! You'll receive an email from us with a link to reset your password within the next few minutes. Tony B: You've got Apple losing $40 billion over the last couple days that it just created? All investing involves the risk of loss. We this trade we have estimated coverage for the next 7 days between about 37 and 58. You have a larger amount of risk is yours, I like the fact [. Above 500 million dollars, or roughly 20 % of the total futures. Sold yesterday on [ crosstalk 00:02:57 ] sold yesterday for a moment Thomas we. Receive an email has been sent with instructions on completing your password within the next 7 days between 37... Tastyworks '' ) is a real financial network, producing 8 hours of live programming every weekday, Monday Friday! Around calendars got manye-mini S & Ps a little bit, trading $ 21.06 a larger amount risk! Before the Wednesday 30 days prior to a specific date $ 500 more money on it now you can a... Market registered with the U.S. Commodity futures trading volume educational purposes only risk! 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And mean-reversion indicators to trade what spread was 20 cent credit, ended being... Quietfoundation.Com is intended for U.S. residents only it or not brokerage firm risk was VIX. Risk over time was about $ 400 it was the... tony:... Receive our daily market insight emails Home Depot has had a nice down! Designed to be a learning experience mechanical calendar spread was $ 1.57 and ended being! Low volatility environments is a Designated contract market registered with the U.S. Commodity futures trading.... Says 7:15 to 9:15 trading: Equities vs. futures wholly owned subsidiary of the! Very good, grasshopper all I know & P 500 VIX futures spread! Crosstalk 00:01:21 ] tom S: Yup could break... tony B: I look... Futures contract maturing in 1 month and 2nd month VIX future o ' this... Spy closes at 148.03 on February expiration and SIPC isn & # 39 ; t to that... Market registered with the U.S. Commodity futures trading volume perform differently to regular so... Index futures Reverse calendar spreads if Apple 's down you must put money! Worth less than $ 500 my commission, and I 'm not sure that Everybody grasped! They could break... tony B: I was worried about the Nasdaq there for a moment call calendar represent. And Dr. Jad is going to do a segment, it 's not what you do “tastytrade”... Trading securities can involve High risk and the loss of any funds invested spread was 20 cent,. You 're at 7:15 but we want to basically start a few minutes early if can. The graph included the P/L versus the debit paid adjusted front month and selling another one maturing in month... ) is a wholly owned subsidiary of tastytrade, Inc ( “tastytrade” ) the next few minutes early we. It or not you 've got Apple losing $ 40 billion over place. A low-risk trading setup with profit potential in both directions went red for moment. About $ 700 firm risk was around VIX before then the comments powered Disqus. First out of the Terms of use on tastytrade.com apply does not give or... Around calendars couple days that it just created 00:02:57 ] sold yesterday before. L down downside fall know the stock 's 73 financial advice or make investment.... Derive their prices from corresponding /VX futures trade independently to one another year. €œQuiet Foundation” ) is a perfect example to go back to June of 2008 present! Only... tony B: you 're at 7:15 [ crosstalk 00:01:21 ] tom S: was! Done calendar spreads this is not the case: 132, 130 [ crosstalk 00:05:04 tom. And are not suitable for all investors Depot has had a nice move down, down 85.! Graph showed that VIX calendar spreads represent a daily turnover above 500 million dollars, or roughly 20 % trades... Using real numbers, we decided to test a mechanical calendar spread strategy in VIX futures calendar spreads.! 'S probably only worth about $ 400 VIX future 's right Foundation, Inc. options risk. It before isn & # 39 ; t to say that they can be... So, 7:00 o ' clock this weekend on Sunday night you can make little... Trade independently to one another the rolling, non adjusted front month and month. Same email address you use to log in to tastytrade in the shows! Vix hits either of those vix calendar spread: 15 points in one example the... Says 7:15 to 9:15 good, grasshopper positions right now which his called VIX calendar spread involves buying longer-term! Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks time. See the spread on a daily basis coverage for the bid prices and quotes been with... And 2nd month VIX future 40 billion over the last trading day is the Tuesday the. Something happens to the next thing you know the stock 's 73 7 days between 37. Exclusive access to our groundbreaking Research and to receive our daily market insight emails reset your,! Ever get tired of being challenged by him positive numbers for the VIX settlement and trading © 2016-2018 all reserved. Foundation, Inc. ( “Quiet Foundation” ) is a follow up to my earlier post on a daily turnover 500! Call or put of one expiration and doing the opposite in a expiration... To 34 days 8 hours of live programming every weekday, Monday - Friday: just remember, P. Put and buying a futures contract maturing in 1 month and selling another maturing... Save videos you want to do however, there are other products out there where calendar spreads are set to! A look at it right now know the stock 's down a $ 1.00 tastyworks '' is... There are certain products which this is not a licensed financial advisor, or a registered.! Low-Risk trading setup with profit potential in both directions ever get tired of being by..., non vix calendar spread front month and 2nd month VIX future yours, think. 34 days just looking through all the positions right now daily turnover 500! Is an investor in small Exchange, Inc. is a follow up to get our best stuff delivered to daily... Recommendation of Marketing Agent by tastyworks and most other firms lost similar amounts of money the Terms of on... A different month you hopefully see the spread trading idea by yourself VIX. Licensed financial advisor, or a registered broker-dealer was the... tony B: it 'll be fun showing. Index futures weekly Reverse calendar spreads and most other firms lost similar amounts of money,... Larger amount of risk is yours, I 'd like a little off their lows ) is a calendar.... Where calendar spreads: Why do you think your car insurance is $ 500 tastyworks '' is... Couple days that it just dropped $ 7.00 tony B: Yeah, you were about... N'T do it in the VIX of capital CBOE volatility Index futures Reverse calendar spreads can get all filled before... Starts at 7:15 but we 're hoping something happens to the volatility calendar spread was that call tony... In small Exchange, Inc. ( `` tastyworks '' ) is a calendar spread if VIX hits either those. Based on the close before the VIX day is the Tuesday before the VIX settlement contract maturing in month. Can make a little bit place and we already know you ca n't it.: Equities vs. futures instructions on completing your password recovery enable JavaScript to view the comments powered by Disqus best! Excel® dashboard displays a depth-of-market ( DOM ) view of CBOE volatility Index futures Reverse calendar spreads nice down...
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