Skip to content




Trading VIX Versus VIX Futures

Despite a jittery equity market, the VIX has fallen towards the lower end of its 3 month range. Unfortunately for those trying to capitalize on a falling (uninvestable) VIX index, the tradable VIX futures do not seem to care what the more widely watched VIX index does. The front month VIX futures contract closed at 28.5 while the VIX closed at 23.93. That leaves a spread of 4.57. Since the inception of these futures contracts, that gap has never gotten wider than 5.23 which occurred on July 14, 2009.

4.57 is on the upper edge of the VIX/VIX Futures gap

So how do you actually trade the closing of this gap?  Go long one month ATM calls and puts, delta hedge that position and short the equivalent vega position in the front month futures contract.  As with all trades, the only place where you will find a perfect hedge is in a Japanese garden.

Posted in Derivatives, Markets, Trading Ideas.

Tagged with , , , , , , , .



Copyright © 2009-2013 SurlyTrader DISCLAIMER The commentary on this blog is not meant to be taken as an investment advice. The author is not a registered investment adviser. There is no substitute for your own due diligence. Please be aware that investing is inherently a risky business and if you chose to follow any of the advice on this site, then you are accepting the risks associated with that investment. The Author may have also taken positions in the stocks or investments that are being discussed and the author may change his position at any time without warning.

Yellow Pages for USA and Canada SurlyTrader - Blogged

ypblogs.com