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Vix Trader
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Past: Analyst / Trader at Exis Capital hedge fund. Sales and Trading at Citigroup. Portfolio Manager: 25M AUM under managment, Sydney, Australia. Current: Privet Fund manager Specialize in Vix and Vix derivative trading,1500% plus return since October 2011 Trading the Nostro account Consulting... More
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  • Free Hedge And A Great Trade For A Short Market Correction Using VIX Spreads

    Key Points:

    * VIX April-May spread seems very attractive at 1.85.

    * High likelihood of profit in every market scenario.

    * Great and free hedge for a short market correction.

    Confession: The writer of this article does not pertain to know where the market is heading next as the crystal ball he received for his 13th birthday seem to work well only 50% of the time.

    When volatility enters the market violently, it always results with the front month VIX future spiking well beyond the second month VIX future as investors are willing to pay a large premium for protection now rather than for protection two or three months down the road. This occurrence is seen in 98.3% of VIX spikes going all the way back to 2007, so a trader that is holding a spread by purchasing the 1st month contract of the VIX and simultaneously selling the 2nd month contract of the VIX will have limited risk and unlimited reward trade on his hands.

    By buying VIX April futures and selling the VIX May futures the trader will basically be holding a spread worth 1.85 points or dollars.

    Why is this appealing? With the spread trading at the high end of the range it is compelling to buy this spread as it will have a hard time expanding further with the May futures trading costly in comparison to the recent 3 year VIX average and the April futures trading at a reasonable price relative to the 3 year VIX average.

    The spread is already large, and there is a high likelihood that the spread will get smaller with every possible market scenario. However, it's important to mention that the spread should be closed before the VIX settlement on Wednesday, April 15th.

    (click to enlarge)VIX April - May spread

    I will go further by recommending traders buy the spread for 1.85 and at the same time sell the VIX April 17 Call for 0.3 cents.

    This trade should make money on every possible scenario besides a catastrophic market crash in the next 5 trading days.

    Its important to mention I hold this spread against other short Vol positions in the VXX and VIX.

    I am a true believer of the distribution of wealth, I write this posts to share my views but to also help people make money. I am adding my P&L here to let readers see that I don't just write hypothetical trades like most brokers do but I also make great returns by "walk the walk and not talk the talk".

    (click to enlarge)

    Apr 08 6:27 AM | Link | 5 Comments
  • The Perfect Market Hedge Using Volatility Spreads

    European Term Structure - a limited risk unlimited reward opportunity

    Investment Vehicle: V2TX December Futures and V2TX January Futures spread trades at 2.05.

    Trade length: 2 months.

    Purpose: Hedge, Speculation.

    What this trade do last year? Spread went from 2 to 0, a 200% gain.

    Why this opportunity exists? December is historically the least volatile month in the year, futures are priced accordingly.

    Where is the big gain? If markets start falling or volatility stay unchanged.

    Max Reward - Theoretically unlimited.

    What is the risk - Very limited.

    (click to enlarge)

    The logic:

    VIX or in this case the European VIX December contract is trading at a price of 17.8, January contract trades at 19.8 and the European volatility index trades at 21.43. December contract will converge with the index at expiration, the gap between December and January is very big and represents an excellent risk/reward opportunity as can be seen by the chart above, the gap is at the high-end of the range and thus the spread represents and excellent hedge going into year end.

    This hedge will make you A LOT of money if the market crashes and has very limited, if any downside risk.

    Tags: VXX, SPY, Hedge, Volatility, VXX, VIX
    Nov 04 6:21 AM | Link | 6 Comments
  • An Opportunity Looms In The Vix Term Strucure

    A Vix High Probability Term Structure Play

    Quick background as this is my first post,

    I worked as an analyst at Exis Capital hedge fund in NYC and as a fund manager in 2 different continents, my specialty is Vix and Vix derivatives. I currently manage my own portfolio and some other high net worth individuals. My returns since Jan 2012 is north of 580%.

    The Trade

    The Vix low term structure looks extremely appealing as the May and June contracts trade at the highest spread they have traded since September. Based on the current global events, low term structure and stock market rally it seems like the 1.05 spread between the contracts could soon close down to the recent average of 0.6-0.7 for the 1st and 2nd contracts


    I would recommend taking advantage of the spread by buying the May and selling June for 1.05. This is not only a great trade but also a perfect portfolio hedge as the first contract May will jump a lot more than June if the market falls and should stay the same if the market stays at these levels. There is an additional twist to this trade to the more bullish traders out there by selling covered calls on the May 16 strike. The trade should be closed on the last Vix May trading day.

    May 09 10:35 AM | Link | 1 Comment
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