I was only half kidding when I noted in the VIX and More disclaimer “Anyone wishing to trade VIX derivatives should have their head examined.” If you pick your spots, there are some great VIX setups out there, some of which Brian Overby recently highlighted and I summarized for the blog. VIX options can also provide relatively inexpensive portfolio insurance. The problem is that VIX options have many idiosyncrasies that make them much different from what even an experienced options trader might expect to encounter.
Today I see that Futures & Options Trader has included an article by Marc Allaire (author of The Options Strategist) on the subject of VIX Options on pages 16-19 of the current (December 2007) issue. Allaire is given enough space to get under the hood and offer up a fairly detailed treatment of VIX options. For those looking for a beginning to intermediate treatment of the subject, this is a good place to start. Fortunately, Futures & Options Trader is available free of charge in digital form. If you follow the link above, the logistics are self-explanatory. Note that these are the same people who also put out Active Trader Magazine.