Friends: Market movement
foes: Theta decay, ask-bid spread
Common guy: Vega
If anything is missed, please do add them.
What if when we short India VIX(To adjust Vega) and having a options straddle of next month expiry(to lower theta decay). I am aware that India VIX is too costly. But I need to know what could go wrong theoretically in this scenario?
The most difficult task is to make the strategy vega neutral by adjusting the number of contracts required to do so. Even then it is prone to theta decay which can not be neutralized.
As one can not trade VIX spot it is needed to trade only in futures. VIX futures are very illiquid and high costs are involved in trading in VIX futures. So practically one cannot implement this strategy in Indian markets.