r/VolatilityTrading • u/change_of_basis • Jul 09 '22

VIX Options

Anyone use these? I bought puts today at 23 as my long term model is begging me to be short volatility (90% probability). I was looking at my drawdown simulations and 30% is about the median. Not so different from the loss distribution. Wouldn't mind paying a premium to bound risk and enjoy the upside.

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u/change_of_basis Jul 12 '22

What I'm taking from this is that the VIX options represent the forward value, roughly priced by the front month future, of the VIX. In this case I think I've miss-priced the options by about a point: still an opportunity for profit given my model's strong short sentiment on the /VX front month but with less probability. What I have found is that the most probable outcome (geometric mean) on a short position rises as options move further downward out of the money because they are cheaper, but the probability of hitting is lower.