Options Jive

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VVIX's Effect on VIX Strategies

Options Jive

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Tom and Tony discuss the relationship between the VIX and its volatility (VVIX). How are these related and how does this effect our trading? Be sure to tune in to find out!

In the VIX, we sometimes take directional bets on where we think implied volatility will go. However, due to the volatility of volatility (VVIX), we can be right on direction and not make the expected profits. This can be explained by increases or decreases in volatility of volatility. Today, we look at what trades benefit in these varying environments.

Historically, we’ve seen that the VIX and VVIX have a high positive correlation. Still, this high correlation between the two can have some implications for our positions. For example, when getting long VIX through a debit spread, we can be right on the direction, but if VVIX increases as well, the extrinsic value of the short call will rise and cause our profits to be lower than we might have expected.

Tune in to hear Tom and Tony run through how VVIX effects other common strategies in the VIX!

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