Strategies

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Weekly Strategy Discussion

The Weekly Strategy Discussion is designed to assist individuals in learning how options work and in understanding various options strategies. Options involve risk and are not suitable for all investors. The strategies discussed are for educational and illustrative purposes only, and should not be construed as an endorsement, recommendation or solicitation to buy or sell securities. Commissions, taxes and transaction costs are not included. Please contact a tax advisor for the tax implications involved in these strategies.

Buying a VIX Call

Example:  VIX Index 32.12

                October VIX Futures 30.10 

 Outlook:   You are bullish on the VIX Index and expect it to rise over the next six weeks.  

Possible strategy:    Buy 1 VIX October 35 strike call @ $2.65

Potential Profit Outcome Examples:

  • Breakeven = Strike Price + Premium Paid
  • Breakeven = 37.65
  • Maximum Loss = Total Premium Paid
  • Maximum Loss = $265

Summary: Consider purchasing a VIX call if you anticipate a rise in the VIX.  Have a timeframe in mind to realize your forecast.  Risk is limited to the total premium paid.  Profit potential is theoretically unlimited. 

CBOE Volatility Index (VIX)