Thursday, October 01, 2009

Looking for fear to decline...

I general I expect VIX to continue trending lower.  The sell off these last couple of days has jumped the VIX back up to 27.5, so betting on fear dropping I bought a bear spread, selling the October 27.5 VIX options (VIXJY) at 2 and buying the 30 VIX options (VIXJF) at 1.25 for a net credit of  .75.   Worse case loss is 2.5-.75 = 1.75, which doesn't feel too risky.

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