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VIX Options Strategies

The CBOE market volatility Index, also known as the VIX, can be a very rewarding trading vehicle. You can use option trades on the VIX to take advantage of the different moves and volatility in the broader markets. The VIX can mirror the same volatility of the S&P 500. Playing this index long or short can take advantage of these moves without as much risk as in the outright buying or selling of the VIX futures. One of my favorite strategies in the VIX, is the Ratio Butterfly. Ratio Butterfly Example This trade is entered when I feel the VIX is much more likely to move higher than lower. An example of the structure of this Butterfly can be as follows: With the VIX trading around the 15 level, you sell 4 VIX 15 Puts, buy 1 VIX 16 Put and buy 4 VIX 11 puts. Place all of these orders in the same expiration, which is approximately 20 to 40 days from expiration. I have had consistent profits with this strategy whenever the VIX begins to trade around 15 or even lower. In the 12 to 14 area, you could also sell your Butterfly around the 14 strike. This […]