Options Jive

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Buying Options vs. Buying VIX

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

While we have been stuck in a bit of a rut lately when it comes implied volatility in the broad market indices, there have still been plenty of opportunities to be had either in this particular implied volatility (IV) market or elsewhere in single stocks. Today, the guys rap about attempting to play the extreme in IV by using either options on the S&P 500 (SPY) or direction in the S&P 500 IV Index (VIX).

Tom and Tony go through the pros and cons of buying options in an attempt to get long IV in a complacent market and go on to compare the strategy to selling puts in the VIX to the same end.

A small study shows that buying options, even when managing, was not a successful strategy when IV was low. However, trying to play direction in the VIX did see some success at depressed levels.

Check out the comparison of these two long IV strategies above.

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