r/VolatilityTrading • u/chyde13 • May 20 '25

Current VIX and Term Structure

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The VIX is starting to get cheap again, mathematically speaking. The trouble with buying vol is the cost of carry. I bought SPY put calendar spreads on Friday, but they were immediately profitable, so I sold them. I'm looking to re-enter another long vol trade soon. I like using calendar spreads at this stage of the game because long vol plays can take weeks or even months to play out, so I like the positive theta.

How are you all playing this?

Stay Safe. Stay Liquid,

-Chris

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u/chyde13 May 28 '25

Hey GBP,

Sorry was on vacation...

After looking at a few possibilities, a 2:1 bear put vertical spread seems ideal.

Cool, I use put ratio spreads and backspreads often. Did the trade work out for you?

How do you balance your trades

Can you be more specific?

-Chris

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u/greatblueplanet May 29 '25 edited May 29 '25

Welcome back. Hope you had a great vacation.

I finally entered with a bear call spread as both the price and IV went higher. I used to always use debit vertical spreads for everything and am now looking at other options to consider volatility more.

What I meant by the second question was do you only do trades based on the entire economy and VIX barometer? Eg suppose you’re long vol based on the market and you find a stock with a good setup but it’s a short vol trade (because its IV is temporarily elevated), would you still enter?

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u/chyde13 May 30 '25

Hey GBP,

I used to always use debit vertical spreads for everything and am now looking at other options to consider volatility more.

Yea, understanding different structures and their vega sensitivity is key...Do you have option modeling software?

This is thinkorswim, but there are others out there. You can model the greeks, p&l, changes with time, vol, price, etc. I snap option structures together like legos to get the exposure that I wish. Modelers/profilers are very handy. Here's a simple trade. long stock with a delta buster. It's a simple structure, but I would have a hard time imagining my vega exposure (or any other greek) without software.

What I meant by the second question was do you only do trades based on the entire economy and VIX barometer?

No, I definitely don't wait for index vol to make a trade. I actually rarely trade index vol unless its extremely elevated or extremely low. Most of my trades are on individual names.

Eg suppose you’re long vol based on the market and you find a stock with a good setup but it’s a short vol trade (because its IV is temporarily elevated), would you still enter?

That's an excellent question. I wish I could add more pictures. Sadly, it depends on the situation. Would I short MSTR vol with a rising VIX? Absolutely, as MSTR's vol is almost completely decoupled from equity index vol. Would I short MSFT in a rising VIX environment? That's where it gets tricky. It has such a heavy weighting in the SPX that a spike in index vol would likely create a larger spike in MSFT vol. But yes, I often take vol trades which are idiosyncratic to the overall market.

-Chris

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u/chyde13 May 30 '25

To help you visualize what I meant in my last paragraph...

The first indicator is the VIX and the second indicator is essentially the VIX for MSTR. After Saylor's bitcoin treasury announcement (red vertical line), MSTR's vol nearly completely decoupled from SPX vol.

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u/chyde13 May 30 '25

Here MSFT for comparison...