The Option Alpha Podcast

68: VIX Index - How To Trade Volatility w/ Mark Sebastian from OptionPit.com

Oct 31, 2016

Former floor trader and hedge fund manager Mark Sebastian discusses trading volatility with the VIX index. Topics include the history of the VIX, pricing, VIX futures term structure, and simple strategies for trading volatility with higher success probabilities. Mark shares insights on back spread and hedging strategies, trading VIX options, and finding and trading companies around earnings.

50:23

Episode guests

Mark Sebastian

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Episode notes

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Quick takeaways

To select companies for earnings trades, focus on big, liquid names and look for high implied volatility setups.

Options provide more flexibility and require less active management compared to futures contracts.

Choose strategies based on the level of implied volatility and pay attention to the term structure of volatility to determine potential trade opportunities.

Deep dives

Trading Strategies for Earnings

To select companies for earnings trades, focus on big, liquid names. Look for high implied volatility setups and adjust your strategy based on the level of implied volatility. As implied volatility increases, consider more aggressive strategies like short straddles or iron butterflies. Make sure to set your breakeven points outside the expected move to increase your chances of success.

Introduction

3min

Mark Sebastian's Background and Option Pit

2min

The History and Evolution of the VIX Index

22min

Trading Volatility: Back Spread and Hedging Strategies

13min

Finding and Trading Companies Around Earnings

5min

Getting Questions Answered and Introduction to the Seven-Step Entry Checklist

2min

Trading Strategy for Netflix After Earnings Announcement

4min

Show notes: http://optionalpha.com/show68

Naturally, if you’ve started trading options for any reasonable amount of time you’ll run across the VIX index. Or as it’s commonly referred to, the “Fear” Index. And while the concept of tracking and trading volatility with the VIX might sound intimidating at first, trust me, it’s not all that complicated and just requires a little common sense.

In today’s podcast, we’ve brought on a very special guest, Mark Sebastian, a former floor trader, hedge fund manager and the guy behind OptionPit.com. What’s great about Mark is that not only does he have a lot of experience as an options trader, but he’s also got a lot of specialized knowledge when it comes to the VIX and volatility products like VXX, UVXY, and VXZ that I know you’re going to love.

During the show, we’ll talk about the history of the VIX, how the index is priced, how the VIX futures term structure accounts for mean reversion and some simple strategies you can use to trade volatility with a higher probability of success. So, don’t be afraid to dig into this podcast this Halloween - Mark and I have some yummy volatility treats waiting for you (okay I just had to throw that in there given the release date).

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The Option Alpha Podcast

68: VIX Index - How To Trade Volatility w/ Mark Sebastian from OptionPit.com

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Trading Strategies for Earnings

Options vs Futures: Why Choose Options?

Using Volatility to Determine Strategy

Trading VXX and UVXY

Trade Example: Netflix Post-Earnings

Remember Everything You Learn from Podcasts