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iPath S&P 500 VIX ST Futures ETN Message Board

  • goodoptday goodoptday Jun 16, 2013 7:08 PM Flag

    VXX LEAP Put Trade

    I have question to VXX LEAP put buyers. The following is 2014 Jan put prices (average of bid/ask) at the close of FRI this week, VXX 20.79.

    15.0 Put 1.595
    16.0 Put 2.03
    17.0 Put 2.45
    18.0 Put 3.125
    19.0 Put 3.675
    20.0 Put 4.325
    21.0 Put 4.975
    22.0 Put 5.65
    If I bought 18.0 put at last Friday's close (3.125), how much put premium do you expect for $18 put when VXX drops 3.00 to 17.79 by end of next week (for 1 week) assuming no meaningful spike while VXX goes down? Expiration is 25 weeks away. So average time decay per week is 4% although it would be somewhat higher now and lower getting close to expiration.
    When I analyzed similar case with 2012 June VXX option history data, I was surprised to see small premium increase for put relative to put premiums on the buying day.
    This puzzles me as there seems to be other force decaying the premium apart from time decay even for ETN that has downward pressure/bias.

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25.84+0.56(+2.17%)Aug 28 5:32 PMEDT