VIX Bull Call Spread


The broader market continues to rise and burn traders looking to short it.  The SPX closed at it’s all time highs.
However, at some point in time there will be a pull back.  One way to play this is by going long the VIX which has been hovering around the 12.50 to 13.50 range for the past several trading sessions (towards the lower end of the yearly range: 11.30 – 26.66).  Basically looking at a mean reversion scenario.

VIXChart_5-12-2013

A bull call debit spread is one way to trade this.  The June 13 13/15 call vertical (37 days to expiration) is currently priced at 90c.  For a 10x vertical, we’re looking at a max loss of $900 and a max gain of $1,100.  The BE is at 13.90.  The current probabilities indicate a 30.64% chance of VIX moving north of 13.90 by June expiration.  However, keeping the mean reversion theory in mind, I am not too uncomfortable with the scenario.  Look to get around 15% of max risk.

VIX_PL_Greeks_5-12-2013

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This entry was posted in Bull Call Spread, Indices, Options, Vertical Spread, VIX. Bookmark the permalink.

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