Hi. Since the level of volatility we are currently seeing never
lasts too long, I was thinking about taking a short VIX position.
Looking at the VIX (-25% TODAY) since volatility is reducing, I
would have expected the inverse VIX (ZIV) to go up but it is
flat... Should I understand these derivative tools are not liquid
enough or what else??
Shorting volatility is asymmetrically more risky than shorting
stocks (except during earnings or FDA announcements on biotechs),
so if you do it, I recommend defining your risk by buying puts or
selling call spreads on the VIX itself or maybe UVXY rather than
being naked short any long volatility instrument.
I have used XIV to trade vix spikes the way to play is buy xiv
the first spike over 20.00 on Open sell at least 50% if gains are
greater then 5%. The other half I let them run.
Yesterday picked some up in 25 range sold some at 30 and holding on
to rest. I user RSI3 on VIX Yesterday it spiked to 100 today
it is below 60 now we should get a second spike in next 5
days which would set up the divergence on RIS3 and subsequent
fall of RSI below 50 confirms it. Also to keep in mind that when
VIX is above its 200 sma we are generally in a strong up trend in
vix and down trend in spy. I find XIV to be best way to play
spikes in VIX.
Not an expert in this, but Look at the website of the issuer,
some ETN use the short term VIX as underlying, and they do
aggressive contract rolls ... that alone eats up quite a bit, then
look at the contract currently actives and check the spread
... if they are in contract rolls, this will skew the ETF on
something as volatile as VIX the past few days
extract from the prospectus of an ETF I trade sometimes ...
(HVI.to - Inverse Short Term VIX)
The Underlying Index operates by, on a daily basis, selling VIX
Futures Contracts with a nearby settlement date and purchasing VIX
Futures Contracts which settle on a later date. The roll for each
contract occurs on each business day of the Underlying Index
according to a pre-determined schedule that has the effect of
keeping constant the weighted average maturity of the relevant
futures contracts. This process is known as “rolling” a futures
position. The constant weighted average maturity for the futures
underlying the Underlying Index is one month.
Inverse VIX question for Matt/Steve
Posted by jocelyn on 25th of Aug 2015 at 02:38 pm
Hi. Since the level of volatility we are currently seeing never lasts too long, I was thinking about taking a short VIX position. Looking at the VIX (-25% TODAY) since volatility is reducing, I would have expected the inverse VIX (ZIV) to go up but it is flat... Should I understand these derivative tools are not liquid enough or what else??
Thanks.
Jocelyn
Shorting volatility is asymmetrically more
Posted by a_l_ on 25th of Aug 2015 at 02:54 pm
Shorting volatility is asymmetrically more risky than shorting stocks (except during earnings or FDA announcements on biotechs), so if you do it, I recommend defining your risk by buying puts or selling call spreads on the VIX itself or maybe UVXY rather than being naked short any long volatility instrument.
I have used XIV to
Posted by bsagen on 25th of Aug 2015 at 02:51 pm
I have used XIV to trade vix spikes the way to play is buy xiv the first spike over 20.00 on Open sell at least 50% if gains are greater then 5%. The other half I let them run. Yesterday picked some up in 25 range sold some at 30 and holding on to rest. I user RSI3 on VIX Yesterday it spiked to 100 today it is below 60 now we should get a second spike in next 5 days which would set up the divergence on RIS3 and subsequent fall of RSI below 50 confirms it. Also to keep in mind that when VIX is above its 200 sma we are generally in a strong up trend in vix and down trend in spy. I find XIV to be best way to play spikes in VIX.
Not sure Jocelyn but all
Posted by steve on 25th of Aug 2015 at 02:44 pm
Not sure Jocelyn but all these ETN's attempting to track or invert the VIX do not track them well all the time.
Not an expert in this,
Posted by mla127 on 25th of Aug 2015 at 02:52 pm
Not an expert in this, but Look at the website of the issuer, some ETN use the short term VIX as underlying, and they do aggressive contract rolls ... that alone eats up quite a bit, then look at the contract currently actives and check the spread ... if they are in contract rolls, this will skew the ETF on something as volatile as VIX the past few days
'short term VIX' is itself
Posted by a_l_ on 25th of Aug 2015 at 02:56 pm
'short term VIX' is itself a hybrid of the current front & back month VIX futures and has a daily roll.
Like you said a_l_ ...
Posted by mla127 on 25th of Aug 2015 at 03:02 pm
Like you said a_l_ ... thx !
extract from the prospectus of an ETF I trade sometimes ... (HVI.to - Inverse Short Term VIX)
The Underlying Index operates by, on a daily basis, selling VIX Futures Contracts with a nearby settlement date and purchasing VIX Futures Contracts which settle on a later date. The roll for each contract occurs on each business day of the Underlying Index according to a pre-determined schedule that has the effect of keeping constant the weighted average maturity of the relevant futures contracts. This process is known as “rolling” a futures position. The constant weighted average maturity for the futures underlying the Underlying Index is one month.
...and UVXY up to 63...
Posted by a_l_ on 25th of Aug 2015 at 03:56 pm
...and UVXY up to 63... that's a remarkable move