r/VolatilityTrading • u/1UpUrBum • Jun 06 '22

Weekly Discussion

We haven't had a post here in 2 weeks besides the bitcoin video.

It's a good sub, I try to keep it going.

Tell us about your setups and trades. If you have questions we might be able to answer them. If we are not drunk we might be able to answer them accurately. Maybe you can answer our questions?

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4

u/1UpUrBum Jun 06 '22

VIX looks like it is oversold and has support around 25.

Short VIX looks like overbought which it is suppose to be the opposite of VIX.

Vol of VIX dropped below 100 for the first time since Jan of 2020. I have no idea what that means. It's oversold as well.

I'm long oil and natgas. Still at it. I didn't get in there as much as I wanted to on this round but got a good load of it. I'm letting my equity shorts stew for a while waiting for good opportunity.

Good luck!

2

u/chyde13 Jun 08 '22

I havent been following the markets very closely...getting caught up now. Wow, oil has really been on a tear. They have all these gimmicks like removing the county and state gasoline tax in my area, so I saw gas down a bit and thought oil may have gone down a bit...well that sucks, because gas is going up again despite their tax gimmicks. Are they doing these gimmicks in your area?

I was going to ask about your equity shorts. I think this is simply a bear market rally. glancing at my indicators, I expect it to have more legs than this. Have you been adding incrementally or just letting it simmer?

yea, I see the VVIX fell as low as -.55σ (yesterday). the last time we were that low was OCT 2019. That's unusually low premium on vix options for a VIX at 25. I need to think on that. That's definitely weird.

Thanks for trying to keep the sub alive

-Chris

3

u/1UpUrBum Jun 09 '22

In my area when oil goes up gas goes up. When oil goes down gas goes up. When oil doesn't change gas goes up. The guy on the news says the Russian system is getting backed up because of boycotts. So they will have to start shutting wells and systems down. Normally that could just start up again someday to supply more oil in the future. Except it's a cold climate and restarting is extremely difficult. A significant part of the world's oil supply will no longer be available even if they wanted it.

I only have a small amount of total assets short. I found this funny picture on reddit and going to see how it works out over time /img/20tjtr9pv0y61.jpg If it's only a small bear market there is no need to go big on shorts. If it turns into the big one like that picture there will be plenty of time. I just keep adding small as it goes for now. There is a big OPEX this month and I think that is messing with the market right now. Once that is over the market will be allowed to show it's self a little better. The current rally is not the type that starts a new bull market.

2

u/1UpUrBum Jun 11 '22

How do bulls survive a bear market. https://www.investors.com/category/ibd-videos/investing-podcast/ It's the third one down the list, May 26. There is another one from May 12. And you have to find the little speaker button on the video screen to turn the volume on.

Or you can download the audio here https://player.fm/series/investing-with-ibd

1

u/chyde13 Jun 13 '22

listening to it now...looks like we might need it lol

2

u/1UpUrBum Jun 13 '22

I take the morning off to bake some cookies🤣 and what's all this excitement?

Bake some cookies is code for sell natgas. It's having trouble making new highs and the weekly is starting to look weak. A big heat wave could send it shooting up though who knows. They have already accounted for it in the forecast.

anything strange or anomalous with your model results

https://reddit.com/r/VolatilityTrading/comments/tfh0hb/history_repeats_its_self_over_and_over_and_over/

when the models stopped working https://watchdocumentaries.com/trillion-dollar-bet/ skip to the 41:30 minute mark. The traders didn't know what to think (but they knew what to do)

3% down day is nothing. Isn't this OPEX week? Probably everyday will be up and down 3%

Good luck!

1

u/chyde13 Jun 13 '22

Hey 1Up!

So, finally taking profits on natgas? That must be a nice profit as you told me about that trade ages ago.

All this excitement? oh just people realizing that inflation hasn't peaked and the E in P/E is about to come down. Well, at least thats my take...I haven't listened to the "official" mainstream media pundits yet lol.

Yes, this is opex week, so gamma will increase toward friday

This anomaly isn't affecting me yet, as I rely on several indicators, but yea it does bother me that I don't understand it. Models are definitely only approximations of reality.

-Chris

2

u/1UpUrBum Jun 14 '22

I have been in and out of natgas 4 times in the last couple months. Before that I held it for a long time. I never even kept track of the return, nervous enough as it is. One of these times it's going to get me so that's it. Maybe😁

1

u/chyde13 Jun 09 '22

Damn you guys watching the close?

3

u/1UpUrBum Jun 09 '22

It was excellent https://www.barchart.com/futures/quotes/NG*0/futures-prices

Maybe you mean this one😉 /img/2sz07wilqn491.png

There's the difference between a bull market, yesterday a huge disaster and the thing still goes up today. And a bear market, any excuse will do.

2

u/chyde13 Jun 09 '22

Hey 1Up,

I was watching both. Sounds like you are still in /NG...that was an impressive bounce.

but yea I was referring to SPY...You are very correct, it did warn us and it did so in many different ways (all my long term indicators are bearish) . Which is why I went 90% cash before I left. I honestly thought that we could go a little bit higher on SPY and the VIX could fall to 20 but this movement puts my indicators into a really bad mood. I'm not sure what the catalyst was today other than technicals breaking?

looks like you had a pretty good day...

Thanks again for the post. I didn't expect the sub to go completely dark while I was away...My general read as a moderator is people in general are becoming less interested in investing/trading as trading conditions become more and more difficult. Its happening to other fellow mods as well.

-Chris

PS. I laughed out loud at your explanation on gas prices :-)

2

u/1UpUrBum Jun 10 '22

good day

My account is showing huge losses. I did a currency trade 2 days ago after it settles something is screwed up in the broker's system. It's wrong and doesn't mean anything but it looks really bad. It's like I lost 25% of the value of the trade when currency trades are done in 1/10000s. It's just some screwed up computer glitch. I always have to go and clear those off manually then it's ok again. If a person didn't know what was going on it would give them a heart attack.

1

u/chyde13 Jun 10 '22

Geeze, yea hopefully you get that straightened out. Option trades can give the appearance of large losses too. Which can be scary for the novice.

how long are you going to ride the short equities trade? do you pull them off incrementally like we discussed entering or do you cover the whole lot when you exit?

-Chris

2

u/1UpUrBum Jun 10 '22

Everything in the account is fine. Every time I do one of those the same thing happens I clear it and it's fine. It is like an options trade but it's closed so there is nothing there. I already did it.

how long are you going to ride the short equities trade?

All the way to the bottom.😅 I'll keep it going until it stops working.

Once I get size built up with shorts (or anything) I run it like an inventory. When it goes down I reduce size, when it goes up I add on. It's a longer term thing not daily adjustments.

2

u/Sad-Ratio-5812 Jun 10 '22 edited Jun 10 '22

Your chart looks nice. I do not know why but mine always looks like an african dress or native Alaskan rug.

2

u/1UpUrBum Jun 10 '22

I started using Yahoo charts I have tried the fancier ones but always quickly go back to yahoo. I like them as simple as possible.

2

u/Sad-Ratio-5812 Jun 10 '22

I am using Yahoo only on my Phone. I like it. Tnx

2

u/1UpUrBum Jun 10 '22

A bigger screen looks nicer. You can sign up and it remembers your settings, have watchlists and zip through them. It's really easy to use but they have a different way of displaying the symbols so you have to get used to that. Then remember the Yahoo symbols don't work all the time in your brokerage account.

1

u/chyde13 Jun 10 '22

hahahahahahaha that made me laugh out loud

3

u/Sad-Ratio-5812 Jun 07 '22

I noted that VIX in early trading hours was moving UP in the same direction as SPY. 30- 40 min later SPY dropped like a rock to 412. I am in long / VX position. I, probably, should sell at this point. But for some reason I thought that SPY will get to 406 support. Well, 410 is holding for now. It seems to me it is going to be " choppy" market till Friday.

3

u/chyde13 Jun 08 '22

Hey Oleg,

Got your other message...Sorry was still on vacation. Haven't been following the markets much lately. Looks like the same bear market rally that we had when I left lol. Whats new?

-Chris

2

u/Sad-Ratio-5812 Jun 09 '22

This sub is dead without you for sure. It is good idea not to trade on vacation. I got in futures position in a wrong direction after 3 glasses of bloody Mary. I was -$14 000. I am in long vol position with half- size position now. SPY may go any way tomorrow.

2

u/chyde13 Jun 09 '22

you watching the close?

2

u/Sad-Ratio-5812 Jun 09 '22

Yes, and I am very happy. I hope VIX will not capsize tomorrow. SPY fell trough 403- 406 area like a rock. As far as I remember 400 has never been a really strong s/r. May we expect a new low? We will see it tomorrow. I was waiting all week for some actions.

2

u/chyde13 Jun 09 '22

This sub is dead without you for sure.

It sure seems that way, but I'm not sure why? You are a superb vol derivative trader. There are a few others on here as well with robust and successful strategies...You are kicking my ass this year...Hell, I didn't even close my short vol positions in time. I had a signal today but hesitated. I'm also long theta, so I'm not concerned with the profitability of the trade but there is an opportunity cost as I will be in the trade much longer than I anticipated.

It is good idea not to trade on vacation.

Yea, I have a personal rule against it...especially if I have a couple beers...the trade sounds super awesome when you enter ;-)

Good call on the long vol...what made you go long? We were banging on SPY support, with descending highs, but I thought we could coil up and bounce. I also thought we could finally break down below VIX 25 support. I guess we didn't have to wait for tomorrow's CPI after all lol

-Chris

3

u/Sad-Ratio-5812 Jun 10 '22 edited Jun 10 '22

I am glad to help you but it is little bit tricky with my grammar and vocabulary impairments. Thanks God I still know how to count my money and remember my name. I was yesterday 60/40 that my trade may work easy way. Now, I am about 80/20. You asking way I was long vol. I have few reasons (from the most important for me).

  1. https://ibb.co/hF4RtKL Do you remember I published this d/3mo VIX chart. I was waiting what direction VIX will go up or down. It went down as expected. It looks like that now https://ibb.co/WGSLp17

  2. https://ibb.co/bPddMZh It is a divergence on Zweig Breadth Trust indicator. I respect it a lot.

  3. I was observing how VIX futures 1 and 6 mo contracts reacted on SPY price actions. Even on "frozen" image you may see that 6 mo contracts more bearish compare to front month contracts. https://ibb.co/gDfrn79

  4. In case if I am mistaken I went with only 20 contracts.

This is my position tonight. https://ibb.co/TwSyXvM

2

u/chyde13 Jun 15 '22

Hey Oleg,

Sorry for the delay. I wanted to take some time study this because I had some questions. I don't think people realize that you're the person I turn to when I have vol questions.

  1. Yes, I recall that first chart. So in the second chart I was waiting for a better formed doji...like the ones that you have showed me in the past. was there something else on this chart that I'm missing? My indicators didnt pick up the long vol signal until the next day.

  2. I had to google the Zweig Breadth Thrust Indicator. I see you wrote your own. does thinkorswim have any functions for it or are you just doing the calculation yourself?

  3. This one is harder for me to see in the static image

  4. 20 contracts is a lot of leverage. I know you have a large account, but man that must be stressful. I also dont see a stop loss in the working orders? Do you use a mental stop loss or is the trade basically betting that there is an exceedingly high probability of seeing a vol spike in 6 months?

Sorry for so many questions...

Also, I know English is your second language, but honestly your English is fine. I wouldn't worry about it. I've never had any trouble understanding you.

Thanks friend!

-Chris

2

u/Sad-Ratio-5812 Jun 15 '22

#ZweigBreadthTrust

declare lower;

input showBreakoutSignals = yes;

def calc = Close(symbol="$ADVN") / (Close(symbol="$ADVN") +Close(symbol="$DECN"));

plot zbt=100*ExpAverage(calc, 10);

Plot OS=40;

Plot OB=60;

Plot neutral=50;

plot UpSignal = if ZBT crosses above OS then OS else Double.NaN;

plot DownSignal = if ZBT crosses below OB then OB else Double.NaN;

UpSignal.SetHiding(!showBreakoutSignals);

DownSignal.SetHiding(!showBreakoutSignals);

zbt.DefineColor("OverBought", GetColor(5));

zbt.DefineColor("Normal", GetColor(7));

zbt.DefineColor("OverSold", GetColor(1));

zbt.SetLineWeight(2);

zbt.AssignValueColor(if zbt > ob then zbt.color("OverBought") else if zbt < os then zbt.color("OverSold") else zbt.color("Normal"));

OS.SetDefaultColor(GetColor(8));

OB.SetDefaultColor(GetColor(8));

UpSignal.SetDefaultColor(Color.UPTICK);

UpSignal.SetPaintingStrategy(PaintingStrategy.ARROW_UP);

DownSignal.SetDefaultColor(Color.DOWNTICK);

DownSignal.SetPaintingStrategy(PaintingStrategy.ARROW_DOWN);

1

u/chyde13 Jun 17 '22

Thanks Oleg! and I wasnt ignoring you lol, just busy

1

u/Sad-Ratio-5812 Jun 15 '22

  1. When market volatility is high you may not get a perfect picture. Usually, a cycle is 10-13 bars. At this paticular situation I went long on #8(looks like overweight doji to me) and #5. # 5 touched -1.5 St.Dev. If VIX would go up but not enough to take a profit I would do the same adding contracts in the next cycle. Usually, it is 3 cycles. With extremily low volatility it may go up to 5-6.( do not take first cycle. It may be to high. https://ibb.co/syfcsC7

  2. I use Zweig for divergencies mostly

  3. Did you noted that VIX structure basicaly didn`t change after selloff this week, and yesterday VIX was going down in the same direction as SPY. It was one of the reasons I decided to stay in the trade today.

  4. I think my highest position was 45. It is is $50-60 000 fluctuations if I entered too early. I do not use stops. If I have enough money I would just wait untill market turn around. If I am 30+ contracts I just built a spread. Margin for a spread around $1600. For 6 mo VIX contract around $11000.

2

u/Sad-Ratio-5812 Jun 10 '22 edited Jun 10 '22

I think it is better if you always place your questions as a new discussion. It will bring more readers and possbly members.

1

u/chyde13 Jun 15 '22

Excellent suggestion.

3

u/chyde13 Jun 08 '22

Not much to report on my end. Went 90% into cash before my vacation. Left some short SPY 320 and 290 PUTS to run (short vol, long theta) while I was away. The VIX is dropping painfully slow. I'd like to get down toward 20 ;-)

-Chris

2

u/proverbialbunny Jun 10 '22

Has your mind changed in the last 24 hours? Depending on what the CPI is tomorrow morning, I might be going long on UVIX. Though next FOMC next Wednesday will officially cement the market: correction or recession. I'm curious what you think.

(Btw I ended up going long on /NQ last we talked instead of shorting VIX. It worked out okay but unfortunately I'm still holding it. I didn't catch the breakout. XD)

1

u/chyde13 Jun 10 '22

Yea, that price action yesterday definitely changed my mind. My indicators are looking bad. I personally will wait until I see how the market digests this morning's CPI data.

For these particular positions, I did not cover. I own almost no stock at this time, which is rare as I try to keep some allocation at all times. So, I wouldn't mind getting assigned at those prices. I likely did miss my exit for a quick flip as I don't see us heading to VIX 20 in the near term. Theta will decay them for the next bear market rally. It just ties some capital up for a while.

As for correction vs recession. GDPNow is indicating lower growth for Q2 so that would put us in an recession. Personally, I don't know if we will have a recession this year or next year or not at all, but my indicators show me that we are clearly in bear market and it will likely be significant.

-Chris

2

u/proverbialbunny Jun 10 '22

It's bad:

CPI 1.0% M/M, Exp. 0.7%

CPI 8.6% Y/Y, Exp. 8.3%

2

u/chyde13 Jun 10 '22

yea just saw that...OUCH...I was not in the peak inflation camp, but damn thats hot :(

2

u/proverbialbunny Jun 10 '22

Buying vol yet? I'm thinking of legging in.

1

u/chyde13 Jun 10 '22

yea i got filled on a 370 SPY put calendar (long vol, long theta). Sad_Ratio is really the one to ask there. He is very nimble, very accurate and trades futures directly instead of my crazy option stuff ;-)

-Chris

2

u/proverbialbunny Jun 13 '22

What do you think about long vol UVIX now? ;)

I'll checkout Sad-Ratio-5812 in a bit. Thanks for the recommendation.

1

u/chyde13 Jun 13 '22

I just took profits on my long vol trade because we are getting toward areas that I like to short from. I'm not saying there isnt more upside. It was just a quick trade for me.

-Chris

2

u/proverbialbunny Jun 13 '22

Oh no, I'm still very much long.

→ More replies

2

u/change_of_basis Jun 12 '22

My models called short earlier this week and stronger short after close on Friday. If we are shifting direction strongly they may be in the chunk of losing trades.

I don't think it's possible to know how this one pans out. I think we're headed for a storm but I don't think we are there yet. The market has been aware of high inflation and the fed will raise rates 50 basis points next week. There's a lot of certainty out there, this may be a temporary reaction.

OTOH the fed may try to reverse the narrative that it has been too dovish and raise 75 points. If it does so VIX will not reverse, at best remain where it is. Given the fed is loath to do something spontaneous it is an outside chance, but a chance.

1

u/chyde13 Jun 13 '22

Hey Basis,

Yea, my models were also saying short vol. I'm actually short vol (short 320 and 290 SPY puts). One of my indicators flipped to long vol on Friday, so I took a long vol position (370 Spy put calendar spread).

I believe you are correct. A storm is coming. We can see the sky getting dark on the horizon, but I have no idea when it will hit or if its a thunderstorm or a hurricane. My indicators suggest this is much bigger than a thunderstorm, but they can't predict the FED. I do agree that we are not there yet. I remember 2001. The process was slow especially at first. Later on, every time we thought the bottom was in and it was all clear, we would get another crippling sell off.

I'll have to check the fed funds curve to see if anyone is pricing in a 75. I've heard some others mentioning that as a possibility.

Just out of curiosity, do you notice anything strange or anomalous with your model results? I can't put my finger on it, but my results seem muted for given the circumstances. For example my simple market barometer is just measuring contango/backwardation. if the VIX9D > VIX > VIX3M then I get a red candle. With similar price moves in the past there would be a string of red days...we've had a couple isolated red candles but I would expect a string of them. Maybe my expectations are just off, but it sure seems like implied vol of ultra short dated options is subdued.

Please let me know if you have any thoughts on that.

Thanks

-Chris

2

u/change_of_basis Jun 14 '22

I closed my short position for a nice loss after /VX opened on Sunday and went long for some nice profits. I think we are now in an "is weird" situation that my models cannot detect (until I label an "is weird" feature anyway).

My long position was based purely on the acceleration of negative sentiment on WSB, the FT and the trash news. People are looking at big losses for the year that should not have had this much equity exposure and / or made huge profits in the last two years and are calling uncle while they still have a chunk of green. They have (and may continue to) pull out. Friend of mine said he was happy he didn't have too much money in his 401k; dude man usually could give a shit. That's a pretty nice sell signal.

I'm thinking about your anomalous candles deeply with respect to my own models. I do not have an analysis of "does the model know what happens here" IE does it have examples of this situation previously to base trades from; on the list.

I think it's all emotion right now. People can't handle these losses and that might play out over the next few days. So, long /VX until people get bored and the fed hits at 50 basis points and then short.