{ "media_type": "text", "post_content": "Anybody ever done Vix covered calls? Any insights, pointers, pros/cons?", "post_id": "60f501fe0eba480020821c27", "reply_count": 6, "vote_count": 1, "bowl_id": "5acc42208c6b52001375e11e", "bowl_name": "Option Traders & Investing" }

Anybody ever done Vix covered calls? Any insights, pointers, pros/cons?

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You can't do true CC on the VIX. Maybe PMCC but I've never really heard anyone play it like that. I'm sure it works like any other ticker tho

you can’t own vix. it’s cash settled so no such thing as covered calls

Right, you’ll have to choose vxx

This is a horrible idea as VXX will decline over time due to the long term reversion of the VIX futures curve. Then when it does pop (as it will usually do a few times a year) your upside has been capped because you wrote a covered call. In a stable or rising market, the premium you collect will not offset the decline in the underlying and in a sharp downturn you will leave a LOT of $$ on the table. You’d be better off writing credit spreads on UVXY - either calls or puts to match your trading perspective. Spreads are key to mitigate against large sigma events.

Not necessarily a horrible idea but with all option trading depends on a number of factors. The vol of vol or in this case the IV of VXX calls is a key factor here. If you’re writing 1 month options slightly upside and getting over 10%+ premium for them, I don’t think that’s a bad trade. Today’s Aug 36s are trading over 4$ - you have the ~8-9% upside in stock to strike plus the 4$ credit in the tail event vol keeps rising. If Vol doesn’t rise and you essentially bot ur stock 4$ cheaper today, not too bad, and you’ll get to re write next month as well. You can definitely harvest option premium yield here, it’s just a higher risk / higher reward CC yield harvesting (of course since vol of vol here is much higher than your typical single stock IV).

I did it with VXX it has its place in a jumpy market, but not one with a strong up trend

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