VIX DEC 18TH 16/20 SHORT CALL VERTICAL (CONT'D)
Updated
This is a continuation of a trade I started in July as a VIX "Term Structure" trade with a current scratch of 1.93/contract and a break even of 17.93. (See Post Below).
My original thought process was "the usual" -- look to take profit at 50% max. With the spread currently valued at .65 at the mid, I would ordinarily do that here, but am going to continue to roll the spread out as a unit for additional credit/cost basis reduction, since I'm in and out of this basic play a lot of the time anyhow.
One option I'll naturally look at if volatility hangs in there at these low levels running into expiry is to roll the spread out for a credit while simultaneously narrowing the width of the spread to reduce risk, reserving "widening" of the spread for periods of higher volatility when it may be necessary to widen the spread to receive a credit on roll because volatility has yet to mean revert within the lifetime of the spread
For example, I can currently roll from the December 16/20 to the February 16/19 for a .40 credit, simultaneously improving my break even from 17.93 to 18.33 and reducing risk from 4 (the width of the spread) - 1.93 (credits received) = 2.07 to 3 (the width of the new spread) - 2.33 (credits received) or .67.
Naturally, what I do will depend on what happens between now and expiry ... .
My original thought process was "the usual" -- look to take profit at 50% max. With the spread currently valued at .65 at the mid, I would ordinarily do that here, but am going to continue to roll the spread out as a unit for additional credit/cost basis reduction, since I'm in and out of this basic play a lot of the time anyhow.
One option I'll naturally look at if volatility hangs in there at these low levels running into expiry is to roll the spread out for a credit while simultaneously narrowing the width of the spread to reduce risk, reserving "widening" of the spread for periods of higher volatility when it may be necessary to widen the spread to receive a credit on roll because volatility has yet to mean revert within the lifetime of the spread
For example, I can currently roll from the December 16/20 to the February 16/19 for a .40 credit, simultaneously improving my break even from 17.93 to 18.33 and reducing risk from 4 (the width of the spread) - 1.93 (credits received) = 2.07 to 3 (the width of the new spread) - 2.33 (credits received) or .67.
Naturally, what I do will depend on what happens between now and expiry ... .
Trade active
Rolling the Dec 18th 16/20 as is to Feb, where the correspondent /VX contract is trading at 17.55, for a .55/contract credit, a 13.8% cost basis reduction of the risk represented by the spread. Scratch at 2.48 versus current spread value of 1.25.
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