OPENING: SVXY MAY 18TH 13 SHORT/SEPT 21ST 13 LONG PUT CALENDAR
... for a .36/contract debit.
Ordinarily, calendars in VIX or VIX derivatives just plain don't work. This is due to a variety of reasons, not the least of which you're just plain paying too much in extrinsic value in the long-dated option.
Additionally, the standard calendar is usually set up on the call side of things in anticipation of call side movement and on the put side of things in anticipation of put side movement. Here, however, I'm going "the other way," and will roll the short put out "as is" to bring in credits, leaving the long-dated option alone. I'm still looking for call side movement, but intend to capitalize on decrease in price of the short put instead of increase in price in the long call as you would be a Plain Jane call calendar.
The other reason why I'm going this way instead of a call calendar is that I don't want to be in SVXY short shares. If anything, I want to be long in them ... .
Ordinarily, calendars in VIX or VIX derivatives just plain don't work. This is due to a variety of reasons, not the least of which you're just plain paying too much in extrinsic value in the long-dated option.
Additionally, the standard calendar is usually set up on the call side of things in anticipation of call side movement and on the put side of things in anticipation of put side movement. Here, however, I'm going "the other way," and will roll the short put out "as is" to bring in credits, leaving the long-dated option alone. I'm still looking for call side movement, but intend to capitalize on decrease in price of the short put instead of increase in price in the long call as you would be a Plain Jane call calendar.
The other reason why I'm going this way instead of a call calendar is that I don't want to be in SVXY short shares. If anything, I want to be long in them ... .
Trade closed manually:
Covering here for a .38 credit, so basically a scratch. I neglected to realize that -- post XIV failure -- SVXY metrics were changed to have it mimic 1/2 the daily movement of VIX instead of 1 times the movement, so it's definitely not the instrument it was.