So another reason why I would recommend using VIX options with caution? You have to price volatility of volatility.
Yes, the VIX itself is an index of volatility. An option on the VIX prices based on the market estimate for the volatility of that volatility estimate.
Confused? Ypu won’t be after this episode of “Soap” (OK, that’s a dated joke, but if you ever catch a rerun, the show was hysterical).
Jamie in these vids actually explains the concept well. And trust me, it’s a confusing one.
Anyway, a customer yesterday bought the Nov 37.5 put, Nov. 60 call combo for $2.85. In effect betting on an increase in the volatility of…….volatility over the next couple weeks.
If you enjoy the content at iBankCoin, please follow us on Twitter
I haven’t had to deal with derivatives of derivatives since my days of doing differential equations. I’m glad that’s over with. Now I count on my fingers and toes.
just wait….Triple ETF’s are here!
I like the CBOE variance futures…it’s sigma squared son. That shit can get ridiculous.
yeah, and there’s truly someone on the other who understands it way better than i do.