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Dan Larsen
Saxo Bank’s Head of FX Options Dan Juhl-Larsen shares his insights and experience trading FX options and looks at the opportunities on offer in the market.
Squawk / 14 September 2016 at 17:58 GMT
Hello Serge, I 've followed your recomendation described here https://www.tradingfloor.com/posts/volatility-to-tick-up-again-7906787. I bought a Oct 15 call at 4,5
With recent VIX moves I would expected to close the trade with nice profits but instead I'm seeing that the trade is still in red zone. Even with VIX at 20 the call value reach around 3,9.
Do you know why is this happening this way? Why the call value is not moving as the underlying?
Thanks!
1y
Serge Berger Serge Berger
Hi, yes it has to do with the futures curve of the VIX futures. If i were you I would close the Oct 15 calls and buy some Nov calls for a trade.
1y
Feders Feders
So there is no way this trade could end giving some profit?
1y
Serge Berger Serge Berger
Unlikely at this point, unless we get a much larger spike in the VIX. These vix options shouldn't be held more than a few weeks at most
1y
Feders Feders
Very well , thanks Serge!
1y
Serge Berger Serge Berger
Anytime!
1y
Market Predator Market Predator
Hello guys, please let me join yours interesting communication. @Serge: 1) maybe better to use some vertical strategy: in case of NO "drastic action scenario" for foreseeable period. Is my assumption correct, if we look back to the chart? I know everyone is winner after the battle, just Q from me.
2) Re: "it has to do with the futures curve of the VIX futures" has this issue to do with contango/backwardation, or expiry or different issue? Guys I do not trade Options yet at all, sorry if my Q are primitive for You and sorry for my plain English. Thx!
1y
fxtime fxtime
VIX CALLS are ultra corrosive over time. Theta curves rapidly destroy the VIX CALL and whilst it is always best to trade the VIX at extremes of its normal range it is even safer to trade the VIX ONLY when it is at an extreme high eg 28+ as you know the volatility will not sustain such levels so a VIX PUT at 28 or more is statistically far safer than the CALL at an extreme low.
I can post the stats or theta curve if you want.
1y
Feders Feders
Thanks!, yes please , let see the graph

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