VIX Long Call Spread

Yikes! The SPX is up over 9.2% already this year, and is less than 1% away from its average annual return since the Pleistocene. The wooly mammoths must be happy. With this rally in the first five weeks of the year, it’s no wonder that the VIX is back down below 16 and the VVIX is struggling to stay above 80. Fear, apparently, is approaching extinction. But maybe, just maybe, with most of the SPX’s work for the year behind it, it might take the rest of 2019 off. Of course, it could keep surging, but perhaps a little mean reversion – particularly in the VIX – might be in order. If you think that the VIX might rally from here, the long call vertical that’s long the 15 call and short the 18 call in the March expiration with 40 DTE is a bullish strategy with a debit less than the intrinsic value of the 15 call with the March /VX trading at 16.95 and that has a 54% prob of making 50% of its max profit before expiry.

This Trade Is

Total P/L
0%

Leave a Reply