I recognize that the VIX positions are a hedge, to be thought of as insurance. But they are options -- worthless after expiration, did we buy (sell) them with the idea that they could become worthless, or will there be an trade alert prior to expiration? May sound like a stupid question, but I've never done this kind of hedge before -- but I do understand insurance.
I can't speak for the Pro team, but my understanding is that we'll just let this spread position expire worthless if it comes to that. Right now (at least in my case) it has already lost more than 75% of its value, and the VIX appears likely to stay below the lower strike up through expiration. If it does stay below the lower strike, then both calls will expire worthless and we don't have to do anything more. If you want to close out the entire position (buy to close the short call and sell to close the long call in a single trade), you can, but I don't expect any such rec to show up. As I recall, in the rec to set this up it stated that we could have a 100% loss of capital, but since we put in an exceedingly small percentage of the total portfolio this is considered an acceptable loss. I think it also said we might have to do this same trade 2 or 3 times before we make any money on it.Dan
Thanks for the reply Dan. It is pretty much whatI was thinking, but since this is my first time to use options in this manner (certainly not my first options), I wanted to feel that I was not missing anything.
Dan or whoever is listening,re: VIX may optionWith Expiration a week away and the Vix doesn't look like it is any mood to pop, why not close out the position early and salvage what little premium could be harvested. The difference in the $17 call and the $25. call is still a cash credit, still a loss in the total trade, but a little salvaged before it all goes away?Maybe there is a good explanation?Thanks,Deek
With Expiration a week away and the Vix doesn't look like it is any mood to pop, why not close out the position early and salvage what little premium could be harvested. The difference in the $17 call and the $25. call is still a cash credit, still a loss in the total trade, but a little salvaged before it all goes away?Well, you certainly could do that if you feel like it. However, keep in mind that this is a hedge position (although more of a minor one, I think), but if we had some major market turmoil over the next week or so, this position could still turn out to be highly profitable. So I, for one, plan on riding this one all the way into the ground, if that's what it takes. At this point, mine is only worth $20. That's small change out of a portfolio of >$100K. I only put $114 into it initially--again, a VERY small investment with a fairly low chance of being profitable. That's why the position was sized the way it was. But if we have some major turmoil in the market place, this could be worth as much as $800.Dan
I did just that, about the time that you wrote your reply, so I had not looked back at the board until now. I can understand where Dan is coming from, but, even though I have a larger stake invested in PRO, I don't like taking even a small loss when I know I can do something to avoid it. The chances of something happening the next week were too low for me, and it turned out that I was right this time. Thanks for your reply, appreciate it.
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