So the markets have tanked. Can't say I called it, but I did say that the bull market is over. just a couple weeks ago. That means that vol has gotten jacked.
So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.
If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.
If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!
Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).
No comments:
Post a Comment