What are prices like on expiring current week, at the money VXX calls when the VIX spikes? With lowish volatility today, it seems to be about $0.70 for an expiring this week @ the money call. I'm wondering how extreme the price gets when the VIX goes north of 30. Would one be paying $1.00, or maybe $3.00 for only a weeks worth of at the money? Or maybe the $0.70 is high already and doesn't change much. Thanks for the input!
it will be higher for sure. rather 3.00 than 1.00 vxx options are very high in general, because when volatility spikes, it spikes fast and high. i remember this december when VIX spiked, an ATM sell option - but for one year more - on vxx costs 13.00 USD.
You might want to look into opening a brokerage account so you can have access to their software which will have built in backtesting going back at least 5 years. You can play around with historical prices all you like and build yourself a trading system based on actual data rather than random snippets from a chat forum.
1 week options on VXX are cheap right now relative to history and would be almost double in price using IV levels from last December. The ATM option currently trades at ~62 cents with ~65% IV. If we look at history of 1 week options on VXX, we see that last December IV was 130%. Repricing the current option with 130% vol yields $1.2 for the May 15 ATM option, almost 100% more. Hope this helps. Check out the chart below.
I would add though, while it's true that VXX vol is "cheap" now, timing vol spikes is a futile endeavour. For every time you're right, you'll likely have several where you were wrong. Unless you're going to be using this information to create some broad system that is diversified and protected, I'd just ignore it. I hope you're not planning to just load the boat long Vol and hope for a spike. A spike is coming no doubt, but will it be next week, or next year? Are you sure you can stay solvent that long? Just saying...