Vix Options and Moneyness Vs Time Decay

[tucciotrader 10]

Hi

 

I would like some help understanding how to trade the vix options. This is where I usually get informations about vix options.

 

Suppose I have the feeling the vix volatility index may increase in the future...

 

Since I am still a newbie with option pricing I must understand what I could be doing wrong by dealing with call options.

 

Originally my idea was to buy call option near the money or ATM. Yet, the premium is really costly!

 

So, I decided it'd be better for me to buy the vix thru a call options with a strike deeply OTM and mar/2011 as expire date, you can check them here: http://finance.yahoo.com/q/os?s=^VIX&m=2011-03

 

The vix is now trading at 19.00 and I thought I'd buy a call option at strike 60.00 which is 0.50$

 

Having said that, I know I could be facing time decay eventually, mostly because the more time passes by, the more the option extrinsic value will decrease...on the other hand the moneyness could affect option price too, for instance the more my option gets ATM the more its extrinsic value increase.

 

Now, I am stuck at this balance between moneyness versus time decay...Also, probaly there are more factors to take into account!

 

What do you think it would best way to long the vix thru options? Is there anyway to simulate options price evolving?

 

Thanks

[SIUYA 11]

"What do you think it would best way to long the vix thru options?"

personally i would stay clear of the Vix - its a derivative on the implied vols.....

tough to measure, trade, etc; etc; leave it to the pones who wish to hedge their already existing volatility risk....so i have no further comment on it

 

"Is there anyway to simulate options price evolving?" ??????????

[wow 10]

Hi

 

I would like some help understanding how to trade the vix options. This is where I usually get informations about vix options.

 

Suppose I have the feeling the vix volatility index may increase in the future...

 

Since I am still a newbie with option pricing I must understand what I could be doing wrong by dealing with call options.

 

Originally my idea was to buy call option near the money or ATM. Yet, the premium is really costly!

 

So, I decided it'd be better for me to buy the vix thru a call options with a strike deeply OTM and mar/2011 as expire date, you can check them here: http://finance.yahoo.com/q/os?s=^VIX&m=2011-03

 

The vix is now trading at 19.00 and I thought I'd buy a call option at strike 60.00 which is 0.50$

 

Having said that, I know I could be facing time decay eventually, mostly because the more time passes by, the more the option extrinsic value will decrease...on the other hand the moneyness could affect option price too, for instance the more my option gets ATM the more its extrinsic value increase.

 

Now, I am stuck at this balance between moneyness versus time decay...Also, probaly there are more factors to take into account!

 

What do you think it would best way to long the vix thru options? Is there anyway to simulate options price evolving?

 

Thanks

 

Not worth to trade:

Low liquidity and what you see is not what you will get.

Lack of regulation and control, the institution traders always win.

I lost $100,000 last year because of the two factors mention above on correctly did according to book and still losing money.

Options are biggest legal scheme ever to scam you money without any trace of wrong doing from New York and Chicago.

[humy65 10]

VIX options are traded off their respective futures. There is no single underlying for these options. The VIX cash is not relevant to the pricing of the options.... you should be looking at the price of the future of the expiration cycle of your option. Note: front month future and VIX cash will converge towards VIX expiration date.