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General Discussion · ***OPTIONS*** Question
msg #123197
3/13/2015 7:20:07 PM

Split the bid ask on both; subtract the result from the higher strike call from the lower strike call; then direct your broker to enter a combination for a credit spread of at least the difference calculated above.

If the options are not liquid they will have a wide bid ask spread and it will be difficult to fill your trade.

Bear spreads using puts or calls, or any option trading for that matter, can be rather inefficient unless you are using options with higher volumes and/or tight bid-ask spreads. It is usually much better to short the particular stock.

General Discussion · 2-Period RSI trades with ETFs -- Using Options
msg #109813
1/2/2013 5:23:09 PM

Eman is right. This is too complicated a question. There are too many variables depending primarily on risk appetite.

If your main concern is slippage, and you want a similar risk reward profile, you shoudn't use options at all as the differences in bid-ask spread and multiple commissions will kill your trade. If you are using leveraged ETFs, the decay factor hurts even more.

The buy 10 calls and sell 10 puts is a synthetic long of the 1000 shares. That is as close as you can get to the same risk profile as holding 1000 shares. It is far too inefficient however after considering commissions and slippage.

The advantages or disadvantages of synthetic positions often lies with asymetrical tax treatment afforded different streams of income - particularly dividends vs. capital gain treatment. Synthetic positions, achieved through the use of options, can also be effective in establishing a short position when your brokerage can't find the shares to borrow.

By the way, you will never have the same risk / reward profile while removing the overnight risk of a gap down. You will ultimately have to pay or surrender the "market cost" of such protection.

msg #133608
1/7/2017 3:36:47 PM

I agree with your preferences .... I've looked at these filters from time to time but never found a reliable method to pick the right stock from the various choices ...

msg #133643
1/9/2017 1:40:21 PM

nice work Graft ...

General Discussion · @ Four - "Let your profits Run"
msg #124492
7/23/2015 3:37:48 PM


Why do you not have a defined exit strategy? I know it has been said before in these forums: your exit strategy is just as important as your entry strategy. Without one, it is very difficult to ever be a successful trader.

I never have to think about my exits!

General Discussion · @ Four - "Let your profits Run"
msg #124499
7/23/2015 9:41:44 PM

Sorry ... I must have missed your comments on the exit methodology. I've been too busy to keep up on all the threads. However, I know there were some detailed discussions on the topic a few years back. My exit(s) have always been based on reversion to the mean strategies. I've always had trouble with exits on momentum plays that you would let run. Trendsurfer used to use the previous day's low as a stop. However, the few times I used that I seemed to get stopped out all too often which seems to validate Larry Connors research that stops hurt performance.

msg #130923
9/7/2016 9:50:58 AM


It might be useful to consider Larry Connors comments:

He suggests backtesting of the ^VIX is irrelevant in trading the VXX. Most of my systems for trading the VXX are based on signals based on the VXX.

I have found ^VIX signals (extended) useful in trading the SPY. Perhaps you can find a way of trading the SPY, leveraged etfs or options on the SPY based on your ^VIX signals?

msg #130955
9/8/2016 9:29:46 AM

I think that paper trading (or trading in a dummy account) with a few VX futures contracts might be useful to see how they track. I'm not certain about the position sizing aspect.

You might have too much exposure with one contract. I think you would have to play around with the options also - spreads in particular - whether bull, bear, calendar or ratio - to get the desired effect (delta close to 1 with the VIX) and to address overall $ risk.

Kevin - you should be paper trading the futures !

msg #130949
9/7/2016 9:20:48 PM

@GMG - that was useful information.

As for the VXX, I've had great success trading it, but as i said, my systems are based on the VXX itself and not the index.

I do have most of Larry Connors material. While the vast majority of his systems are mean reverting - in the case of the VXX - his research indicate it is not mean reverting and thus his primary system is trend following based on moving averages and cross-overs.

It is also interesting as Connors also indicates that VXX is good for pair trading. The article I referred to in my post was written in 2012. Had you paired a long VXZ with a short VXX position, you would have made out like a bandit the last 4 years. You could have bought on almost every dip and made money. I'd post the chart but I'm not sure how .... on stockcharts you can enter the symbol VXZ:VXX and it charts the pair ratio.

I've had real good luck shorting UVXY. It is notorious for being one of the more poorly structured leveraged ETFs and it suffers from a significant decay as a result of rebalancing and other costs. The VIX itselt could stay in a very tight range and UVXY will decay. I like those odds and have been shorting other triple leveraged ETFs also.

msg #131638
9/30/2016 3:10:23 PM

I did some reading and it may be possible to construct a synthetic long on the VIX by buying a near-term VIX call and selling a near-term VIX put. Normally a Call - Put = forward or synthetic stock. You could create a synthetic short by selling the call and buying the put.

Looking at the CBOE site today ... they have the VIX trading at 12.77 down 1.25 (delayed).

There seems to be decent volume on October 2016 (Expiration: 10/05) calls and puts.

The call shows

VIX1605J13.5-E 0.70 -0.90 0.55 0.70 2687 3065

The put at the same strike shows

VIX1605V13.5-E 0.50 +0.30 0.40 0.55 4757 14346

If you were long the call ... you'd be down 90 cents on the contract and you'd also be down 30 cents on the put as its up today 30 cents. The last column is volume so there is decent liquidity in these contracts.

The net combination is that you'd be down $1.20 today on this synthetic VIX share whereas they have the VIX being down $1.25 (almost 10%). That looks like decent tracking. I have the VXX down 4.92%.

I'm not sure about all this - I've traded alot of options but never VIX options on the CBOE. Just putting this out there for discussion purposes.

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