The /VX futures in those expirations are
different, and the VIX options are priced off
those different futures’ prices. Also, if you
trade VIX options in one expiration against
/VX futures in another, both those positions
can lose money if the /VX future that’s pricing
the VIX options you’re trading moves higher
or lower than the /VX future you’re trading.
Say you sell 10 VIX calls in the Sep
expiration, you buy a /VX future in the Dec
expiration, and you think that’s a hedged
position. It’s not. It’s possible for the Sep
/VX future that’s pricing the Sep VIX options to spike higher and cause a loss on the
short VIX call position, while the Dec /VX
future may drop, causing a loss on the long
Dec /VX future position.
But What If …
Wait, one more thing. On the thinkorswim®
platform from TD Ameritrade, all VIX
options have one day less to expiration than
the futures. Yup, they don’t match. The /VX
futures will show one more DTE than the
VIX options, and here’s why.
The last trading time for a /VX futures
contract is 8:00 a.m. Central on the contract’s
Wednesday settlement date. The last trading
time for a VIX option is at 3:00 p.m. Central
on the Tuesday the day before the Wednesday option’s settlement. So, the /VX futures,
and VIX options, settle on a Wednesday. But
the VIX options stop trading one day before.
That’s why on the thinkorswim platform, the
September /VX, for example, will show one
more trading day than the September VIX options. But the Sep VIX options are still priced
off of, and hedged by, the Sep /VX future.
So, while you have many choices to trade
volatility, it pays to do your homework.
Know how volatility products are priced,
how they move, and how they trend.
—Words by THOMAS PRESTON
Create an Alert
BIG IDEA: WHEN YOU'RE AWAY FROM YOUR
TRADING PLATFORM YOU WANT TO BE
NOTIFIED OF EVENTS THAT'RE IMPORTANT
TO YOU. SET UP YOUR REQUESTS USING
THE STUDY ALERTS FEATURE.
Thomas Preston is not a representative of
TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the
author and may not be reflective of those held by
TD Ameritrade, Inc.
Because they are short-lived instruments,
weekly options positions require close monitoring,
as they can be subject to significant volatility. Profits
can disappear quickly and can even turn into losses
with a very small movement of the underlying asset.
GEAR HEAD • SEASONED
For the latest release
notes and thinkorswim
how-to videos, go to
• Staying on top of your portfolio is important whether you’re at
an airport or waiting patiently at the dentist’s office. That’s why
we want to make sure you have all the tools available on the
TD Ameritrade Mobile Trader app. And not just to use your mobile
device to check in, but to move on to the next level where you need
to know exactly when the 50-day exponential moving average
crosses the 117-day linear regression line. That’s where the “Study
Alerts” feature comes in handy.
Study Alerts generates a signal when a “study-based” condition
is met. You can use predefined and custom studies to create your
alerts. If you prefer to use a predefined (or previously created)
study, then choose one from the Study list. The interface allows you
to specify the study plot, input parameters, and aggregation period.
Note that Look and Feel inputs (e.g., colors, painting strategies) are
not available in Study Alerts, and constant plots are not included in
the Plots list.
You can use a combination of studies or implement a new one by
selecting Complex Formula from the Trigger Type list. This brings
up the thinkScript editor.
YOU’RE NOW READY TO SET ALERT RULES. There are several options and fields,
so take time to play around with it. And be careful; you might get attached.
1 – Click the Market Watch tab and select Alerts from the sub-tab row.
2 – Enter the ticker symbol you wish to issue alerts for.
3 – Click the Study Alert button. This’ll bring up the Study Alerts window.
You have several options to choose from: You can set up your alert rules, set up your alert
conditions, create your own alerts, and set trigger types, among other things.