Anyone making money trading volatility?

[highnote]

Just curious... is anyone making any money trading the volatility in this market? VIX hit 40 yesterday. That's the highest it has been in over a couple of years.

Seems to me there is money to made by capturing option premiums.

[Dick Schmidt]

No idea how to capture option premiums, but I had a big day on Monday trading Forex. Mostly trading the Pound against the Aussie and Kiwi, I finished up the day making $13,000. The old Chinese curse of living in interesting times certainly doesn't apply to currency trading. First Greece and now China have roiled the markets, opening huge trading oppertunities. Love it.

Dick

There are 2 secrets to success.
The first is never revealing everything you know....

[_______]

Selling puts would be the simplest way. If you want to sell flood insurance during a hurricane, people will pay almost anything.

I have a few on stocks I would be happy to own at the strike price. But if you are making $13,000 on forex, you probably wouldn't be that interested in the piddling amounts I'm talking about.

[highnote]

Originally Posted by _______

Selling puts would be the simplest way. If you want to sell flood insurance during a hurricane, people will pay almost anything.

That's a good idea. I sold a lot of deep in the money covered calls back in March of 2009 when everyone thought the world was going to end.

I bought stock and then sold covered calls that had a ton of premium. Often the stocks got called away, but not before I captured some of the premium and other times the options expired worthless and I captured all the premium and I sold more covered calls on the stock. It was a great year. That was back when the VIX was around 70 or 80. Who knows if we'll ever see that again?

The riskier, but ultimately higher return strategy was just to buy the stocks outright and hold them. Many of them tripled and doubled over the next year or two.

I don't think this time is the same as 2008 when the market crashed, but with the high volatility and big daily swings in the S&P and DOW it is reminiscent of July 2008.

I went 100% into cash in July 2008 and missed the crash and the didn't have any losses. Then started buying in March 2009.

I'm about 65% in cash now, but have had some losses. I didn't pay attention to my indicators. I thought they were wrong. They were right and I was wrong! Mildly painful lesson, but one I won't forget.

I didn't want to spend a couple hundred in brokerage fees selling stocks if it turned out my indicators were wrong. It turns out 200 bucks would have been cheap insurance.

[PICSIX]

Originally Posted by Dick Schmidt

No idea how to capture option premiums, but I had a big day on Monday trading Forex. Mostly trading the Pound against the Aussie and Kiwi, I finished up the day making $13,000. The old Chinese curse of living in interesting times certainly doesn't apply to currency trading. First Greece and now China have roiled the markets, opening huge trading oppertunities. Love it.

Dick

There are 2 secrets to success.
The first is never revealing everything you know....

Dick, if you don't mind I have a few questions:

1. What size of account are you trading?
2. How many standard lots are you purchasing per trade?
3. What was your initial risk on the trade(s) that made the 13k?

Thanks for any answers you can provide.

I trade only the EUR/USD pair during the European and U.S. sessions. My trades are 100% automated using an EA that I wrote with a friend of mine. The EA basically risks 1% of account balance per trade with a 4% profit target. Average returns are 2-10% per month. I've seen run-ups of over 30% and draw downs as much as 18%.

Mike

[Dick Schmidt]

[QUOTE=PICSIX]Dick, if you don't mind I have a few questions:

1. What size of account are you trading?

$35,000+ It used to be a lot bigger, but an $86,000 hospital bill cut it down quite a bit. Slowly building it back up, but this is how I make my living and I pay all my expenses out of this account every month.

2. How many standard lots are you purchasing per trade?

One or two, depending on the setup.

3. What was your initial risk on the trade(s) that made the 13k?

Most were one standard lot with a 10 pip stop. That puts less than .5% at risk on any one trade.

Thanks for any answers you can provide.

I trade only the EUR/USD pair during the European and U.S. sessions. My trades are 100% automated using an EA that I wrote with a friend of mine. The EA basically risks 1% of account balance per trade with a 4% profit target. Average returns are 2-10% per month. I've seen run-ups of over 30% and draw downs as much as 18%.

If your EA works, good for you, but you've picked perhaps the dullest pair to trade, and one that has a lot of politically motivated volitility. You might try your EA on a few other currency pairs. If it works, you should make a lot more money.

Dick

"There must be a better way to make a living than this. Well, I've looked...and there isn't." Jack Parr

[PICSIX]

If you like to gamble check out UVXY & TVIX. Catching nice day trades in this environment.

Good Luck

Mike

[Dick Schmidt]

Originally Posted by PICSIX

If you like to gamble check out UVXY & TVIX. Catching nice day trades in this environment.

Good Luck

Mike

?????? What are UVXY and TVIX? I thought I knew most of the jargon, but never heard of these two.

Dick

[ReplayRandall]

Originally Posted by Dick Schmidt

?????? What are UVXY and TVIX? I thought I knew most of the jargon, but never heard of these two.

Dick

ProShares Ultra VIX Short-Term Futures (UVXY) -NYSEArca- Watchlist
60.78 Down 3.13(4.90%) Sep 11, 4:27PM EDT


VelocityShares Daily 2x VIX ST ETN (TVIX) -NYSEArca- Watchlist
13.26 Down 0.64(4.60%) Sep 11, 4:00PM EDT

[Saratoga_Mike]

TVIX is a pure day-trading instrument, not that anyone said otherwise. As an intermediate to long-term hedge, it's borderline worthless (b/c of time decay embedded in the underlying hedging mechanism).