tastylive logo
VIX Synthetics | Partial VIX Future - May 21, 2015 | Market Measures
Learn how you can gain exposure to VIX futures (/VX) on a smaller scale by using synthetic long and short combos in the VIX options.
Video Player is loading.
Current Time 0:00
Duration 0:00
Loaded: 0%
Stream Type LIVE
Remaining Time 0:00
 
1x
  • Chapters
  • descriptions off, selected
  • captions off, selected
      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Market Measures

      VIX Synthetics | Partial VIX Future

      May 21, 2015

      In today's Market Measures segment, Tom Preston sits in for Tom Sosnoff as he is out of town. The topic of discussion today is gaining exposure to VIX futures (/VX) on a smaller or modified scale.

      When trading volatility, one can buy or sell VIX futures, which generally ties up more than $5,000 in margin and has a notional exposure of $1,000 per point in the future. For many, this might be much too large for their account size. So, how can you make the same trade as buying or selling VIX futures on a smaller size? The answer lies in the VIX options, which are priced to the VIX futures.

      While the VIX index and VIX futures will differ in price, the VIX options are actually priced to the corresponding VIX future. For example, the current June VIX options are priced to the June VIX future contract. This is because both VIX options and futures are forward-looking instruments, and settle to the same value on the day of VIX settlement.

      One options contract on the VIX has notional exposure of $100 per point, while the VIX futures have $1,000 of exposure per point. So, a 10-lot synthetic combo in the VIX options would be needed to replicate one VIX future. A synthetic combo consists of buying a call and selling a put at the same strike and in the same expiration for long volatility exposure. For short volatility exposure, a long put and short call combo at the same strike and expiration would be used. For example, if the June VIX futures were trading at $16, the long 15 VIX call and short 15 VIX put in June VIX options should be trading for about a $1.00 debit, bringing the cost basis for the strategy to $16 or the same as the June futures contract.

      One long/short synthetic in the VIX options would be equivalent to 10% of a VIX future. If a trader wanted half the exposure to a VIX future, they would trade a 5-lot synthetic VIX combo in the VIX options with the same expiration as the futures contract they wanted exposure to.

      Join Tony Battista and Tom Preston for their own personal insights into this important topic!

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

      More like this

      tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

      tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

      tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

      tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

      © copyright 2013 - 2025 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.