<p>Ivolatility.com has all kinds of stuff and so does hoadley.net. However its a lot of work putting in multileg options and calculating out multiple dates with multiple expirations.</p>
<p>[Apple</a> May Fall Another 20% on ‘Panic Selling’: Analyst](<a href=“http://www.cnbc.com/id/100286054]Apple”>Apple May Fall Another 20% on 'Panic Selling': Analyst)</p>
<p>Part of me says that articles like the above mean that Apple is going up not down twenty percent as the author suggests.</p>
<p>Apple announced that they are going to start building Macs in the US in 2013.</p>
<p>Some customers have reported that they have received iMacs built in the US already.</p>
<p>Doct, it takes work?</p>
<p>Well, you only have to figure out the options that still have a premium at expiration. </p>
<p>I think your aapl trade makes money below the high 530s and above the low 600s. You can run a vol 20 percent lower, 20 percent higher for the 500 calls… You don’t have to worry about the dec puts and if the 650 calls are in play, you will be happy.</p>
<p>Then you have a likely profit and loss range if you hold until dec expiration…</p>
<p>yes - breakeven is 603.58 on 1/19. I had the 12/22 put because of the cliff which I think may be partially resolved on the 21st when the congressional boneheads take their Christmas break and don’t come back until next year. In my bones (which is a pretty pathetic reason for owning this) , I feel that aapl will get above the 603 by the 19th. I would like a program where I put in the volatility etc, legs, dates and it plots everything out so it is visually understandable. I should probably write this myself - well maybe another day.</p>
<p>Is anyone here active in the volatility space? If so, I have a “what am I missing?” question.</p>
<p>At the outset, I should say that I am not talking about buying VXX (I am not a complete idiot). Instead, the question is how one can take advantage of the persistent contango that devastates VXX through XIV while protecting against the kinds of volatility spikes that occurred last year.</p>
<p>My idea would be a pairs trade, long both XIV and VXZ, rebalanced every month, with a 20% stop on XIV each month. I’ve been able to do a four year backtest (using short VXX as a proxy for XIV for 2009 and 2010) and it gives three very strong years and a breakeven year in 2011. However, four years is not enough by itself to give me great confidence. But at the same time, I think the approach is conceptually sound.</p>
<p>What am I missing?</p>
<p>“I would like a program where I put in the volatility etc, legs, dates and it plots everything out so it is visually understandable. I should probably write this myself - well maybe another day.”</p>
<p>That sould be a good program.</p>
<p>EMM1, you are not going to know if a trade is going to work unless you trade it.
You did a simulation. Are the last 4 years of volatility similar to what is happening with volatility today? 4 years ago, the volatility was a lot higher than it is today and Volatility has been trending lower for 4 years. Does this matter ? Have you broken down the simulation to see if the
trade works in rising volatilty periods and flat volatilty periods? Did the trade work continuously throughout the 4 years?</p>
<p>In the end, you are only going to know if a trade is going to work if you trade it. Trade 100 shares or less and see if it works. You do have costs of trading in your model?</p>
<p>Looks to me like there were times being long both xiv and vxz was a loser. I don’t know how the monthly rebalancing would affect the results.
<a href=“VXZ Interactive Stock Chart | iPath Series B S&P 500 VIX Mid-Term Futures ETN Stock - Yahoo Finance”>VXZ Interactive Stock Chart | iPath Series B S&P 500 VIX Mid-Term Futures ETN Stock - Yahoo Finance;
<p>“That should be a good program.”</p>
<p>This might be pretty easy for me to do. I just noticed that my version of matlab has a financial toolbox that includes the black scholes equation.</p>
<p>So now you don’t need to write the program?</p>
<p>I would love to be capable of writing the program. I don’t need it right now, but I would love the capability. </p>
<p>AIG is above 34 right now. I am long the stock and short the 34 calls against it that expire today, and the 34 calls that expire next week. I think I would like the stock to close slightly below 34 today. I did not think this was going to be an issue. Maybe it won’t be.</p>
<p>Edit… Actually 34.05 would be a good close. I could sell the stock in my regular account and buy it in my retirement account. Then I don’t have
to worry about the wash sale rules and taxes. :)</p>
<p>There were three months in the last two years in which both XIV and VXZ dropped. The worst month by far would have been March, 2011, when XIV bounced hard and VXZ dropped after you would have been stopped out on the XIV part of the pair. But I don’t know of any trade that works all off the time.</p>
<p>Here are the premises on which the trade is based:</p>
<ol>
<li><p>The VIX itself (and thus the futures) is, at least over the medium term, almost a pure mean reverter in all market conditions.</p></li>
<li><p>The short term futures that underly VXX are in contango at least 70% of the time. Thus, VXX has dropped in about 80% of the months since it was introduced. Conversely, XIV would have risen in about the same percentage of those months. Again, the problem with XIV is that when the VIX and VXX spike, they can REALLY spike–a phenomenon that caused XIV to lose 75% of its value in about about three months in 2011, meaning that if you bought XIV at the wrong time it had to rise 300% just to get back to even (it has since done that, but barely). Moreover, there is no way to reliably predict when these spikes are going to happen.</p></li>
<li><p>The mid-term futures that underly VXZ are also typically in contango, but the roll loss (I think that is the right term) on the mid-term futures is generally less than the similar loss on the short term futures.</p></li>
</ol>
<p>Now, if all of those premises are correct, than it seems to me that the strategy should be a long term winner, right?</p>
<p>I don’t know.</p>
<p>“Thus, VXX has dropped in about 80% of the months since it was introduced. Conversely, XIV would have risen in about the same percentage of those months.”</p>
<p>This looks mathmatically incorrect to me. </p>
<p>Explain this chart to me…</p>
<p>[VXX</a> Basic Chart | iPath S&P 500 VIX Short Term Fu Stock - Yahoo! Finance](<a href=“VXX Interactive Stock Chart | iPath Series B S&P 500 VIX Short-Term Futures ETN Stock - Yahoo Finance”>VXX Interactive Stock Chart | iPath Series B S&P 500 VIX Short-Term Futures ETN Stock - Yahoo Finance)</p>
<p>Looking at the monthly figures, there have in fact been three cases in the last 24 months in which both VXX and XIV fell. One is the March 2011 situation that I already mentioned. </p>
<p>The other two case result from the vagaries of the process that determines the value of ETFs and ETNs that are based on the daily percentage changes in underlying indexes–something that I surely should have taken into account. Both involve cases of relatively small declines in XIV (these products move a lot). I wouldn’t think that these examples change the underlying argument, but I might be wrong.</p>
<p>I think you should go for it. </p>
<p>100 shares or less…</p>
<p>See what happens…</p>
<p>As you trade, watch and see if the trade works to your expectations…</p>
<p>For example, if volatility rises 25 percent, did each product you own move the way you expected…stuff like that.</p>
<p>I am assuming you can afford to lose a little for the times the trade doesn’t work like the 3 months or so you mentioned?</p>
<p>Gotta go…</p>
<p>The profit and loss is going to be very different being short Vxx compared to being long xiv. Or whatever the symbols are. </p>
<p>Now I really have to go.</p>
<p>Doct, are the implied volatilities of aapl stable?</p>
<p>What are you doing with the appl trade?</p>
<p>Aig is above 34. I would like it to close above 34 tomorrow. It would eliminate any wash sale issues for me in aig.</p>
<p>I sold out of the aapl positions on 12/10 with a small profit due to the gain in the call I sold and the put I bought being greater than the loss of the dtm call I owned. However when I saw aapl dropping today I just bought 1/19 450 calls for 80.75, it closed today with a bid/ask of 82.65/83.45. I probably should have sold at the end of the day and taken some profit. I don’t have a lot of confidence going forward. I wish somebody would stick their foot in these politicians’ mouths. I’m sick and tired of them dropping the market with their inane comments.</p>
<p>Politicians are going to stop making inane comments? :)</p>
<p>That’s a nice buy so far.</p>
<p>the volatility still is around 40%. So there is a aapl vix?</p>
<p>No…I was just wondering what the implied volatilty in aapl was.</p>
<p>I think the implied volatility in aapl is going to drop a little over the next week.
Just a guess…</p>
<p>Who is going to step up to the plate?</p>
<p>[Villa</a> Belvedere at auction: $25 million - SFGate](<a href=“Villa Belvedere at auction: $25 million”>Villa Belvedere at auction: $25 million)</p>
<p>vxapl is the aapl vix</p>