TRADE IDEA: JAN 18TH 14.5/17 SHORT CALL VERT
Updated
If you're familiar with VIX Term Structure, you'll know that the VIX spot price is currently lower than the front month /VX future. Currently, VIX is at 11.7 and the Jan VIX futures contract is at 14.55. The notion here is that the VIX spot price and the Jan VIX futures contract price will converge at some between now and the Jan VIX futures contract expiry (assuming there isn't a massive IV spike that lays that scenario to waste).
Metrics:
Probability of Profit: 86%
Max Profit: 55/contract
Max Loss/Buying Power Effect: 195/contract
Break Even: 15.05
Notes: This is one I will just watch and take profit on at an "opportune moment." If volatility does expand such that VIX spot price breaks my short call, I'll just roll the spread out for duration and wait for an opportunity to exit in one of these sub-15 volatility lulls we have from time to time ... . The Max Profit/Max Loss ratio isn't particularly attractive here, but I'm going small and expect to roll for more credit if we do get a pop.
Metrics:
Probability of Profit: 86%
Max Profit: 55/contract
Max Loss/Buying Power Effect: 195/contract
Break Even: 15.05
Notes: This is one I will just watch and take profit on at an "opportune moment." If volatility does expand such that VIX spot price breaks my short call, I'll just roll the spread out for duration and wait for an opportunity to exit in one of these sub-15 volatility lulls we have from time to time ... . The Max Profit/Max Loss ratio isn't particularly attractive here, but I'm going small and expect to roll for more credit if we do get a pop.
Note
No fill on this one, which is no surprise, since price moved away from the setup, and I wasn't going to chase. I would note that VIX options are somewhat "pesky." Unlike other options, the options price bid and asks are always in .05 increments, rather than pennies, so you will have to shoot for fills at .55, .60, .65, etc.
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