hey hello everybody this is Andrew joov vanazi from option pit.com if you want old guys Traders have been around for a long time uh each usually about 20 to 25 years of uh trading experience check out option bit.com our teaching and trading services but first what are we doing today we're going to do three ways to get along the vix [Music] [Music] now because vix is a unique product I want to explain a couple things first and then we'll go go through it so uh number one is first off the vix options tradeoff of the future the first thing and this will make sense in one second off of the vix Futures so right now if you're trading the a right the Auggie 21 vix future uh prices the August 21 vix options okay it's not cash it's the future so it's the first thing to help you with that the second is skew so what vix has is it has an upward sloping skew so the second part of that is it makes call spreads and call butterflies relatively inexpensive again we'll do some examples here in a second makes call spreads and call butterflies relatively inexpensive and then last is Zone and again from a trading methodology point of view um vix basically has you know four cor tiles uh basically 9 to uh 12.99 call Zone one uh 13 to 17.99 that's zone two oops then we've got uh 18 18 2 23 99 and then we've got 24 and above now when you're looking at this is you know when vix is around 12 it's in the bottom quartile of samples so it doesn't have a lot of room to go down down and it's got a lot of room to go up likewise when vix is 24 it's already in the top quartile for how vix prints and then now below that right um most it will spend most of its time 75% of its time somewhat below 24 so just be mindful of these things when um looking at you know ways to get long the vix so the first thing is is from the future price so right now I'm looking at vix is 1862 it's making a bit of a move today um and one thing you'll notice is if vix is 1862 you go to the August 21 cycle and the 18 calls are a168 now you you would say to yourself okay how come the puts are worth more than the calls that's because the vix future right now is trading somewhere right a little lower than 18 so when you go take a look at it right it's going to be down here so these Futures are actually trading below The Cash Line so if you think about it in this way if time Stood Still and Vic stayed where it was those Futures that August future would have to move up to settle to the cash number so Vic stayed where it was and the Futures continued marching to August 21 expiration vixs would melt up the Futures would melt up to the cash so that's what makes calls calls and call call spreads calls and call butterflies interesting because your underlying is less if your underlying is less that means your calls are going to cost you less so when we're in a little backwardation like we are now backwardation is just your future price underneath um your vix future price underneath the cash you're going to get relatively inexpensive calls so vix is Trading 1865 for example so you could buy the uh 17 27 37 call fly for let's get the prices here let's say 2 70 and 40 so let's just write those prices down right for your call butterfly $2 uh 70 and 40 so what that means is that would be 240 minus uh 140 or $1 okay so your your call fly is costing you $1 $1 so the 17 call fly is costing you right this is the 27 37 uh 47 or whoops sorry s um 10 handles off 17 27 37 right cfly okay with vix trading 18.6 so you can see vix okay vix is actually a dollar and a half in the money so if we settled if vix just stayed where it was and we continued to expiration your call butterfly you paid a dollar for would settle a160 you'd make 60 cents so your call fly automatically is basically decaying in the money so when you have backwardation a little backwardation this is what we have now right your vix call flies are relatively inexpensive also your vix call spreads will be relatively inexpensive so if I look at the here we've got the 17 like the 1725 is a120 now a120 that would be 1820 it's still in the money so you're not spending a lot for in the money uh call spread so the market keeps pressing and pushing um volatility keeps pressing and pushing High uh pressing and pushing higher um you actually have a your long vix but you have a positive Decay profile so that's another thing that you can get here a little backwardation right so with a call butterfly or call um spread so you're literally get you get positive Decay now fix could turn around tomorrow you can hedge buy a put close out your calls but again you you have that uh a little bit of cushion in the trade the last thing I would say is buying vix calls and I don't really like to buy vix calls shortterm I like to buy vix calls when you're in zone one right around here and I buy them two to three months out so they don't Decay very fast and they just kind of sit around there and they kind of hang out until you have a vol explosion so just buying vix calls when you're kind of what I would say in zone one one vix calls and again there's other ways to hedge them that stuff you can learn an option pit uh trade around your calls uh there's all kinds of stuff you can do but between having a vix call in uh Zone one say two to three months out right that is way to I like again it's usually your implied ball is very low calls are a lot cheaper but once you get into back ration and the curve starts to move a little bit call butterflies or call spreads give you a lot of bang for your buck you spending a lot but you have something that could maybe double or triple in price if we actually get a little liftoff in vix so those are three ways to get long the vix in either low Vol Market or in a higher Vol Market and this is Andrew Jovan AI Director of Education for option pit.com there it is byebye