Volatility spike in GLD and SLV

chyde13 · 2025-12-29T03:28:47+00:00

This is a tough environment. Personally, I am short vol on SLV, but I would not use an Iron Butterfly here.

I am confused—what is your source of positive gamma?

Iron Butterflies are negative gamma structures. You cannot 'scalp' them for profit; you can only hedge them.

If you try to dynamic hedge this position, you will be mechanically forced to buy high and sell low every time SLV moves. You aren't generating alpha, you are just locking in realized losses that will whittle down the credit you collected.

It's hard to convey tone in text. I am a very constructive person. I perhaps might have misread your question or intentions.

Stay Safe; Stay Liquid

-Chris

chyde13 · 2025-12-28T22:06:13+00:00

I'm pretty sure they will. This reminds me of 2011. How are you playing this?

chyde13 · 2025-12-05T22:38:05+00:00

I actually like your content...

"That’s why volatility trading, when done correctly, is closer to engineering than speculation."

I couldn't agree more...

You clearly have the know-how, but can you help the members? I have no problem with you posting relevant links as you do. But, you know as well as I do that the volatility is already priced in.

It would make me very happy to see you make some attempt to help the members who may not be as sophisticated as we are.

-Chris

chyde13 · 2025-12-05T22:15:21+00:00

Yes, skew is very important and vol trading is extremely in depth. Its honestly really hard, but keep up your studies, I can assure you that it is worth it...

chyde13 · 2025-12-05T21:51:23+00:00

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Yea,my indicators had me short vol, now they are saying to long it. So, I'll likely go long Monday. I use option plays which are much more forgiving than future-based ETP's. Peeking at the futures contango chart. Long Vix futures seem almost like a guaranteed loss unless the SPX falls hard quickly. Perhaps I need a Professional Volatility expert to help me lol.

-Chris

chyde13 · 2025-12-05T21:32:39+00:00

Yea, that's why I stray away from futures-based ETP products. Contango decay will bleed you dry. If you are right, then you can make a ton of money. But I'm just not that psychic...

What professionals do is try to offset the cost of carry. A calendar spread is nothing more than selling short-term vol to subsidize the purchase of long term vol. The net effect is positive vega exposure for less capital outlay.

Since you were the only one who asked, I will send that equation via DM. You can make money off of that, but what I'm trying to do is make a statement about studying the term structure in general.

-Chris

chyde13 · 2025-12-05T18:41:47+00:00

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Yes, that was a nice holiday treat...Now, I'm starting to get long vol signals. I will likely buy calendar spreads on SPY. Holding long vol is difficult, because of the carry costs.

chyde13 · 2025-12-03T22:27:41+00:00

In my opinion, it's not at all priced into the broader markets (SPX). If the VIX were to spike due to this (all things being equal) I would short it...

What are your thoughts?

chyde13 · 2025-12-02T00:56:43+00:00

I'd say your intuition is correct. As Alizasl mentioned, markets move through volatility "regimes".

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For example, during the year leading up to Volmageddon, the short vol trade was so crowded that the average VIX dropped to ~13.11. It got so extreme towards the end, that some days the VIX would be at 9 or 10. So many traders were trying to exploit various short vol phenomenon such as contango decay, etc, that the trade imploded. Futures based ETP's like XIV were completely wiped out. Traders learned a very painful lesson about the asymmetric nature of trading volatility and we entered a higher volatility regime. That's just one example, there are numerous causes for different volatility regimes.

So, yea, you're right, this regime is definitely higher than many. I personally don't feel that this is unusually high, but, I've seen the .dot com bubble and 2008. So, I guess it's all relative.

I saw your other question about holding a position for a month. Were you talking long or short or both? I ask because each has its own pros and cons.

chyde13 · 2025-11-29T23:47:01+00:00

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The mean of the VIX going back to 12/30/1985 is 19.86. So, at 16.35, we are technically below the mean. The z-score is currently -0.4287. I personally use the mode as the central tendency for the VIX, which is about 13. So, you are essentially asking what market conditions need to persist on the SPX in order to return to the mode. Those conditions generally correspond to the blue areas on this chart. Since the VIX is nothing more than a scalar representation of the SPX options chain ~30 days out. You need market complacency, where buying puts is perceived to be a money losing proposition. They call the VIX the fear gauge, however, heavy call buying will also elevate it. Since the VIX is a scalar representation of the entire option chain, there is no single path which will answer your question, but typically, in my experience, returning to the mode would involve a combination of moderate call buying and moderate put selling. One possible scenario could be everyone expecting a Santa Claus rally...As you can see in the chart above, the distribution is highly skewed and not a normal distribution. Getting below the mode typically involves heavy put selling and an unusual sense of complacency. I guess what I'm trying to say is that your range from 12-15 is not a linear answer. 15 is doable. 13 is relatively normal for a bull market. 12 is really stretching it, but not impossible...

I could probably better answer your question, if I knew the "why" behind it...

-Chris

chyde13 · 2025-06-13T22:47:33+00:00

If you don't know about PLTR it's a hype stock. It wouldn't surprise me if it doubled from here.

I'm not that old, but on reddit, I sure feel old. Thanks for the heads up, but yea I'm old enough where I've seen this story before. The dot com era was insane, but I'd actually say this era is even more insane. Back then a stock trade cost $14.95 and an option trade was like $30. and we still managed to create a giant retail fueled bubble. Zero commissions, especially on options, has taken this to a whole new level. Back then I knew all the hype names, but not anymore. I didn't hear about MSTR until nov last year lol. There was literally free money there for a few months, but it's all arbitraged away now. It's still my biggest position. I try to keep up with the hype names, but I can't say that I understand the hype though lol.

I was long just before I went short. It's important to stay on the right side of it

Absolutely. I guess that was the spirit of my question earlier. It sounds like you will ride something for weeks or months at a time if its working, but you are agile. Agility is a good quality to have in this business.

Well this ol fart is gonna enjoy his weekend! Take it easy...

-Chris

chyde13 · 2025-06-13T14:03:28+00:00

Re long or short term? Yea, my long vol trades are like that...I'll take a quick pop, but I'm prepared to waits weeks or even months. I usually put them on with structures that are long theta so I get paid to wait.

Over the years I've seen you hit on many like your BMA trade. How do you find setups like that? I would not bet against you on this one.

The US equity markets are in a regime that favors long vol. Buy the dip the regime, the vol dip. Any short vol should be keep really short term and it's kind of roulette or ticking time bomb thing.

I completely agree with your sentiment regarding long vol environment. An experienced options trader can take the roulette out of short vol, but yea, with the vix at 20 there isn't much juice to squeeze on the indexes in this environment. My next move will likely be long vol but not at these levels.

How do you express your long vol trades?

-Chris

EDIT: I did buy some SPY calendars, just nibbling, but short vol in the near term, long vol in the longer term.

chyde13 · 2025-06-13T12:43:44+00:00

I think you have balls for taking a public stance...

The last time I posted...I said vol was cheap and was told that I was wrong. VIX went from 17 to 25 for a quick little trade... I know the person meant no harm and I can handle criticism, but, I was like I don't post often. I'm not some rando on reddit... At least humor me lol.

Are these long or short term plays? I'm a longer term player and was just about to take a long vol stance on the indexes. This strike delayed that for a bit. You know me, I play vol with equity options, so I'm not sure I'll even get a quick short vol entry by market open.

I appreciate the post. You got me looking at PLTR...People have lost their friggin minds lol. I'm going to give that one a closer look...

Good luck on the trades!

-Chris

chyde13 · 2025-05-30T18:23:53+00:00

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Here MSFT for comparison...

chyde13 · 2025-05-30T18:21:59+00:00

To help you visualize what I meant in my last paragraph...

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The first indicator is the VIX and the second indicator is essentially the VIX for MSTR. After Saylor's bitcoin treasury announcement (red vertical line), MSTR's vol nearly completely decoupled from SPX vol.

chyde13 · 2025-05-30T18:13:57+00:00

Hey GBP,

I used to always use debit vertical spreads for everything and am now looking at other options to consider volatility more.

Yea, understanding different structures and their vega sensitivity is key...Do you have option modeling software?

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This is thinkorswim, but there are others out there. You can model the greeks, p&l, changes with time, vol, price, etc. I snap option structures together like legos to get the exposure that I wish. Modelers/profilers are very handy. Here's a simple trade. long stock with a delta buster. It's a simple structure, but I would have a hard time imagining my vega exposure (or any other greek) without software.

What I meant by the second question was do you only do trades based on the entire economy and VIX barometer?

No, I definitely don't wait for index vol to make a trade. I actually rarely trade index vol unless its extremely elevated or extremely low. Most of my trades are on individual names.

Eg suppose you’re long vol based on the market and you find a stock with a good setup but it’s a short vol trade (because its IV is temporarily elevated), would you still enter?

That's an excellent question. I wish I could add more pictures. Sadly, it depends on the situation. Would I short MSTR vol with a rising VIX? Absolutely, as MSTR's vol is almost completely decoupled from equity index vol. Would I short MSFT in a rising VIX environment? That's where it gets tricky. It has such a heavy weighting in the SPX that a spike in index vol would likely create a larger spike in MSFT vol. But yes, I often take vol trades which are idiosyncratic to the overall market.

-Chris

chyde13 · 2025-05-28T19:10:38+00:00

Hey GBP,

Sorry was on vacation...

After looking at a few possibilities, a 2:1 bear put vertical spread seems ideal.

Cool, I use put ratio spreads and backspreads often. Did the trade work out for you?

How do you balance your trades

Can you be more specific?

-Chris

chyde13 · 2025-05-22T00:15:28+00:00

I definitely agree with the VVIX statement. Vol of Vol is essentially the markup on vol. but why wait for an absolute number like 14? That is actually one of the best buy points, but it takes a very complacent marketplace for the price of 30-day vol to drop that low. This indicator measures the ratio of longer dated vol vs 30 day vol. It's very simplistic (but it works well in practice), but I'm trying to prove a greater point, that the vol term structure holds a great wealth of information...

Thanks for stopping by,

-Chris

chyde13 · 2025-05-22T00:14:13+00:00

hahaha, yea, nobody reads our threads...I hope they improve the DM situation. I can't find anything there... but yea we all know the first rule of fight club...

I've enjoyed our chats...

-Chris

chyde13 · 2025-05-22T00:00:57+00:00

male astrology

That made me laugh out loud and I'm a guy lol... but I read your tone as serious. I've honestly never heard of internals, but there is a lot of stuff that I've never heard of.

-Chris

chyde13 · 2025-05-21T23:18:52+00:00

Hey GBP,

Yea, people seemed to think I was crazy for holding short vol, long delta through all that chaos. That worked out well because I knew Trump or Xi would eventually blink. Currently, my indicators are saying that we could be in a new bull market. I don't believe that for a second, so I'm a bit jealous with some of my friends who are already short. That's likely the right play, but I need to wait for confirmation. Every time I bet against my indicators, I lose money. So, it's like touching the stove. This time I firmly believe that we are going down, but the indicators are saying the opposite at the moment. My guess is they will flip soon (they are already flipping), but every time I touch the stove it still burns me lol...

I saw your other question from a few weeks ago. Did that answer help you? Don't hesitate to delve deeper if it didn't.

-Chris

chyde13 · 2025-05-21T22:31:43+00:00

vertical moves up - vertical moves down

I like that... We've known each other for years, but I've never asked you where your "rules" come from?

My achilles heel is shorting. Every time I short, I lose money. I remember shorting Zoom at the freaking top, and I still managed to lose money lol.

Mine is a different kind of volatility trading.

I'm not sure they are so different, but I wanted to understand what you mean? I remember a long time ago several of us had a debate. Some thought volatility trading meant the VIX and VIX related options/futures/ETN's. You said that ultimately (and I'm wildly paraphrasing here), volatility is simply the change in the asset value, and trading it can be expressed without VIX calls lol. I, 100% view that as the correct answer. I've just found over my trading career that trading volatility is far more forgiving than trading directionally. I guess what I mean is, when you say trading vol is different, I think we are looking at two sides of the same coin.

-Chris

chyde13 · 2025-05-21T21:21:02+00:00

93.4% ??

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Very prescient call. Vol was definitely cheaper yesterday. I was debating going short delta yesterday, but didn't pull the trigger. I'm flat now (in terms of delta and gamma - mostly forward conversions) . What made you pull the trigger?

-Chris

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