Did covered calls on Oil — bought USO at 37.19, sold-to-open May 37 calls at 1.02 for a net investment of 36.18.
Created a bear spread on VIX options today. Betting on VIX going down is forecasting that the market in general will be flat or positive. I sold-to-open June VIX 16 calls at 10.26, bought June VIX 32.5 calls at 1.88 for a net credit of 8.38. I was able to approximately split the bid/ask prices with my combo order. At the time of the order the spreads were approximately 10.00 / 10.60 on the June 16 options and 1.80/1.95 on the June 32.5 calls. Going with the published bid/ask prices leaves money on the table.
The VIX cash index was around 28.5 at the time my order filled. I initially tried to go short on VXX, but Schwab had VXX in the “hard to borrow” category this morning. I suspect lots of people were trying to short the VXX today. I went with June options rather than May because there are only 7 days left on the May VIX options–I wouldn’t be surprised at all to see one more down leg in this correction. I expect the June options will move much down much slower than the VIX index as the market moves away from fear mode.
- Volatility White Papers: Power Laws & VIX Options Explained
- Back to the oil well
- USO—back in at 32.40
- USO in trading range
- VXX Options—Similarities and Differences with VIX Options
Monday, March 12th, 2012 | Vance Harwood