Rollover

[XxQuote399]

How to deal with expirations ? do you keep the options to the end nd add new months or roll over to next months ? how long before expiration do you roll ?

 

[Martinghoul]

It depends.

 

[XxQuote399]

If you have to enter the (debit) position again after expiration,do you let expire and enter again or do the rollover ?

 

[daveyc]

start buying back your shorts as soon as you are either happy with the results or a couple of weeks prior to expiration. you will risk too much if you hang on for every penny.

 

[Martinghoul]

If you have to enter the (debit) position again after expiration,do you let expire and enter again or do the rollover ?

Honestly, I am not trying to be an ass here... It all depends on what you're trying to achieve.

 

[XxQuote399]

I mean a long position,If you have to do your portifolio all over again when do you roll your 3 month options ? 1 month before expiration ? or open a new series and let that one expires ?

 

[XxQuote399]

I mean,

In a 3 month option when do you guys usually rollover (cause of the theta) if you gonna do the same bet again,like do you roll 2 months before expiration and enter a new 3 month ? (a long option position like a long call or a bull call spread)

I have this question because of the theta bleed,when do you usually roll due to that ?

Thanks

 

[Martinghoul]

Well, your theta depends on a variety of variables, doesn't it?

My point is that the act of rolling the position is a trade in and of itself. In every case, you need to do some analysis to determine what the best entry point for the "roll trade" is. There are no hard and fast rules for when the optimal time for the roll is.

 

[XxQuote399]

do you generally roll how far from 1 month expiration ? the decay accelerates when theres a expiration of the previous series (I guess)

is there some literature about that ?

I totally understand your point,there are a lot of situations

 

[Martinghoul]

I generally stay away entirely from very short-dated options, as, in my asset class, gamma hardly ever is worth the theta, so to speak. This may be different in your world. I don't know of any literature, but, if this is equity options you're trading, you should post your question on EliteTrader. There are two guys there, sle and atticus, who are experts and, I'm sure, can tell you if there are any rules of thumb that they like to follow.

 

[marameo]

I generally stay away entirely from very short-dated options, as, in my asset class, gamma hardly ever is worth the theta, so to speak.

 

[mishdog]

I am in my first trade right now, on the vix futures. It expires on Tuesday, I got told I get a 40% concession on the spread if I rollover.. is there any downside to rolling over? I don't quite follow it all yet don't see why anything expires when the position/price of the vix changes every day anyway, regardless of which period you are in.

 

[marameo]

I am in my first trade right now, on the vix futures. It expires on Tuesday, I got told I get a 40% concession on the spread if I rollover..

Long/Short?

 

[mishdog]

Long/Short?

Long

 

[mishdog]

okay, seems I was a tad naive - didn't realise that when you roll over you get put into the next month's price of the vix, I thought you just roll over the same position you were at.

first ever trade = money down the drain

 

[marameo]

okay, seems I was a tad naive - didn't realise that when you roll over you get put into the next month's price of the vix, I thought you just roll over the same position you were at.

Yeah, you wish

Think of those selling you the futures...why would they ever do that? They are selling volatility (low at the moment) so they may end up bankrupted if volatility jumps; that is why VIX futures are trading mostly in contango. Your counter part needs an edge...the longer-term the higher the risk premium in addition to the spot price...volatility is not an asset class you can accumulate, volatility is not an asset class at all

I wish I could buy the vix and then just wait for the next big financial drama. Unfortunately, it can't be done!

 

[mishdog]

Thanks for getting back to me.

As you can tell, I'm a total novice but was informed it was a good opportunity to buy into the vix and had no idea about the contract expiring. Anyway, I do now so a couple more questions if you don't mind..

- I have a friend that investment banks at a big bank and also told me now is a good time to buy, would he have meant for me to roll over?

- rolling over from the current month and cutting my losses but entering the next month at the current price over 18<, does that sound foolish? I'm not all that tempted, but even 18 is quite low from what I've read

Probably a lesson learned to do more due diligence before parting with my cash, but just wondering if it would be worth sticking it out a little longer.

 

[marameo]

I'm a total novice but was informed it was a good opportunity to buy into the vix
[...]
- I have a friend that investment banks at a big bank and also told me now is a good time to buy, would he have meant for me to roll over?

Well, why did you buy the front-month future? What is wrong with DEC12 expiry or a longer maturity date?

Does the higher price scare you?

I assume you want to buy into the vix as a mid-term investment...correct?

 

[mishdog]

Well, why did you buy the front-month future? What is wrong with DEC12 expiry or a longer maturity date?

Does the higher price scare you?

I assume you want to buy into the vix as a mid-term investment...correct?

Yeah I was looking for a mid-term investment. In all honesty, I didn't actually realise you can extend the expiry date like that.

So, when I bought in a week ago at 16.15 through IG Index, I could have had the option to set December as the expiry? (just would have paid more)

 

[marameo]

Yeah I was looking for a mid-term investment. In all honesty, I didn't actually realise you can extend the expiry date like that.

So, when I bought in a week ago at 16.15 through IG Index, I could have had the option to set December as the expiry? (just would have paid more)

I am sorry, I don't know much about IG Index. Yet, I highly suggest you take a look at this page: CBOE.com (near the bottom of the page you find all the VIX futures trading right now, in contango; does not necessarily mean the the VIX is going higher though!)

Although VIX spot is pricing 14.20 right now, you pay 23.30 for the DEC12 future. That is why the old adage goes like "...no free lunch"

Yet, if VIX spot was to jump over the next weeks, the whole curve would shift up!

As I said before, volatility is not an asset class at all. You are just betting...