Author Topic: Fun with VIX options  (Read 38699 times)

specialkayme

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Re: Fun with VIX options
« Reply #200 on: January 17, 2018, 02:58:30 PM »
I clearly have much to read, and much more to understand. Thank you for pointing me in the right direction though.

I can't say I fully grasp what you're pointing at, and many of my searches so far are starting to make my head hurt with abbreviations and terms I'm not familiar with. But I find it exciting to learn a new investment technique.

xivinvestment.com seems interesting, although I've never been a fan of "black box" investing. It also may be a case of someone that isn't in any way qualified to express such an opinion stating this, but it appears xivinvestment.com is taking a somewhat conservative approach on triggering it's "sell" signals, opening up to considerable losses. Most notably around August 9th (a "Hold" through a 13% drop) through September 13th (when it appears to have come back to closely where it was), November 9th through 20th (7% drop), and the "miss" on the January 16th drop. But I'm likely looking a gift horse in the mouth.

Anyway, thank you so much for the information, and the opportunity to learn and grow.

v8rx7guy

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Re: Fun with VIX options
« Reply #201 on: January 17, 2018, 04:30:13 PM »
Getting nervous about your $2K yet?

jacquespluto

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Re: Fun with VIX options
« Reply #202 on: January 17, 2018, 05:20:48 PM »
specialkayme - Here is the article I was referencing earlier.  It gives a lot of good information and I'm basically implementing a strategy very similar to the strategy 3 referenced.  I'm just adding some additional indicators that help me find comfort in the trade.  Anyway, it's a good read.

http://www.naaim.org/wp-content/uploads/2013/10/00R_Easy-Volatility-Investing-+-Abstract-Tony-Cooper.pdf


specialkayme

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Re: Fun with VIX options
« Reply #203 on: January 17, 2018, 06:36:01 PM »
Thank you so much for the article jacquespluto. I'll put it at the top of my reading queue.

specialkayme

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Re: Fun with VIX options
« Reply #204 on: January 24, 2018, 09:37:57 AM »
I'm having a hard time working through something, and it's tangentially related to some of the topics on this thread, so I was hoping to throw them out there and see what advice I can get, or direction.

Some of the volatility strategies that have been discussed on here involve buying/holding XIV or VXX to capture either increases in value on the volatility markets or capture contango/backwardation, buying options on XIV or VXX, or buying options on leveraged ETFs to capture the same thing.

I'd only ever be interested in going long on options of an ETF if I was comfortable owning the ETF directly. If not, I'd be putting a leveraged play on an asset that I would never own, which doesn't compute for me. So before I can say that I'd feel comfortable owning options on an leveraged volatility ETF long term (UVXY), I'd have to decide if I feel comfortable owning a leveraged volatility ETF long term.

People have advised me, repeatedly, to stay away from long positions on leveraged ETFs. Many articles discuss how you'll be killed by holding long positions on leveraged ETFs as a result of Leveraged Decay, Volatility Drag, or the constant leverage trap (discussed more in depth here https://pensionpartners.com/leveraged-etf-myths/ with a good chart showing almost guaranteed loss over a long time period here http://etfdb.com/leveraged-etfs/leveraged-decay-the-dangers-of-long-term-investing-with-etfs/ and here http://etfdb.com/media/W1siZiIsIjIwMTUvMTAvMDYvOTNmaWdiZXRic19Fcm9zaW9uX29mX1BvcnRmb2xpb19WYWx1ZS5wbmciXSxbInAiLCJ0aHVtYiIsIjc1MHhcdTAwM2UiXV0/Erosion%20of%20Portfolio%20Value.png).

But when you compare long positions taken in x2 and x3 ETFs (like SSO and UPRO) over progressive periods of time, I can't find massive losses of value from leveraged decay or volatility drag. Granted, due to compounding leverage, many of the ETFs over long periods don't produce guaranteed x2 or x3 mirrors of the underlying asset and may produce significantly more or significantly less, depending on the direction, but the actual returns over the past 8 years or so are actually much better than the underlying ETF (in the past 10 years s&p 500 is up 103.7% while x2 SSO is up 230.7%, which makes it over the long term a x2.22 instead of a x2 - - - - and the s&p 500 is up 209.7% in the past 8.5 years while the x3 UPRO is up 2,225.4%, which makes it over the long term a x10.6 instead of a x3).

So where's the volatility drag, the increased fees, and the massive loss of equity?

No doubt they are SIGNIFICANTLY riskier assets, as in down markets you'll lose more than x2 or x3, but if you believe you'll make money in the underlying asset, why not go for the leveraged asset? If you believe VXX is a good play, why wouldn't UVXY be a good play?

While I can find significantly more articles on why you SHOULDN'T own leveraged ETFs long term, there are a very few that say its ok (https://seekingalpha.com/article/2986586-what-the-numbers-say-about-long-term-investments-in-leveraged-etfs for example).

So what am I missing here? Why am I not seeing the massive decrease in value over long periods of time that all the articles say I should be seeing? Or is my snapshot of time (8 years, 10 years, ect.) just poor snapshots of time to be looking at?

ChpBstrd

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Re: Fun with VIX options
« Reply #205 on: January 24, 2018, 10:57:26 AM »
^ When you buy a put option (sometimes referred to as a "long put") you profit from a decline in the price of the underlying asset. If I think UVXY is a stinker, I buy a put to profit from its decline. It is confusing because with options, the term "long" refers to buying either a call or a put and the term "short" refers to selling either a call or a put. Thus having a long option position could be a bet that the stock will rise (a call) or that the stock will fall (a put). Vice versa for a short options position.

You are correct that the performance of leveraged ETFs often does not match their stated objectives. This is explained by contango and backwardization in derivatives markets, management fees, and compounding effects, among other causes. They are only selling an approximation of a hypothetical return.

specialkayme

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Re: Fun with VIX options
« Reply #206 on: January 24, 2018, 11:37:39 AM »
^ When you buy a put option (sometimes referred to as a "long put") you profit from a decline in the price of the underlying asset. If I think UVXY is a stinker, I buy a put to profit from its decline.

But can you think UVXY is a stinker all by itself? UVXY isn't anything independent of itself, other than a leveraged play on VIX. So, if you believed VIX was a stinker, you'd buy a put of either VXX or UVXY, right? And the only reason you'd buy a put of UVXY over VXX is if you believed that it moved rationally, and predictably, in relation to VIX, correct? And many of the articles I've read indicate that leveraged ETFs don't move predictably due, in part, to volatility drag and similar concepts.

So am I missing something? Or is there something about UVXY being leveraged that causes it to move more predictably in contango or backwardization than the underlying VIX? Or is it that all of the reasons ETFs aren't "supposed" to move predictably only cause the values to decrease and never increase beyond expectations (which a view of the UPRO's performance over the last 8 years clearly can't be the case)?

BTW - thank you so much for taking the time to read my likely nonsense and reply. There are very few places, and even fewer people, who are willing to talk about this type of thing that actually know what they're talking about.

eudaimonia

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Re: Fun with VIX options
« Reply #207 on: January 24, 2018, 11:56:22 AM »
^ When you buy a put option (sometimes referred to as a "long put") you profit from a decline in the price of the underlying asset. If I think UVXY is a stinker, I buy a put to profit from its decline.

But can you think UVXY is a stinker all by itself?

BTW - thank you so much for taking the time to read my likely nonsense and reply. There are very few places, and even fewer people, who are willing to talk about this type of thing that actually know what they're talking about.

Yes, UVXY has drag that significantly affects prices. I would never hold this product in a long position. Here is a webpage that has a good description of how UVXY (and some of the other volatility products) work: https://sixfigureinvesting.com/2015/03/how-does-uvxy-work/

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #208 on: January 24, 2018, 12:15:07 PM »
UVXY and VXX are both terribly constructed.  They use the 14 and 40 day futures on ^VIX and roll the position daily.  The normal state of affairs in futures markets is CONTANGO, thus VXX/UVXY daily sell a 'cheap' asset to buy a more 'expensive' one.  The long term decay is fierce and very predictable. 

specialkayme

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Re: Fun with VIX options
« Reply #209 on: January 24, 2018, 12:22:49 PM »
Here is a webpage that has a good description of how UVXY (and some of the other volatility products) work: https://sixfigureinvesting.com/2015/03/how-does-uvxy-work/

From that site:

Quote
For a leveraged fund longer term results depend on the volatility of the market and general trends.  In UVXYs case these factors usually (but not always) conspire to dramatically drag down its price when held for more than a few days.
The leverage process isnt the only drag on UVXYs price. The VIX futures used as the underlying carry their own set of problems. The worst being horrific value decay over time.  Most days both sets of VIX futures that UVXY tracks drift lower relative to the VIXdragging down UVXYs underling non-leveraged index.   This drag is called roll or contango loss.

So it's entirely possible, and to some extent expected for UVXY, due to its leveraged position, to decline when VIX isn't, or even modestly increasing, correct?

Would this hold true for all leveraged ETFs, or is it that UVXY, due to it tracking a volatility index rather than a "traditional" index?

I guess I'm having a hard time understanding why UVXY is projected to decrease due to its leveraged position, somewhat (although not entirely) outside of its tracking of the VIX, while other leveraged ETFs (like SSO or UPRO) don't.

ChpBstrd

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Re: Fun with VIX options
« Reply #210 on: January 24, 2018, 01:59:30 PM »
UVXY is locked into a contract trading methodology that very roughly approximates the ^VIX between the market open and market close each day, but causes severe losses of contract time value over timeframes longer than a day. The fund's own prospectus advises that it is intended for one-day holding periods, not as a long term investment, because it declines in the long term. The contracts it holds long decay faster than the contracts it holds short.

Throw up a chart with ^VIX and UVXY and you'll visually see this decay compared to the index it's supposed to track. For years.

My opinion is that UVXY and its opposite sister by the same fund company SVXY are essentially set up to trade contracts with each other. The fund company's end goal of course is to collect their high management fee for both funds. SVXY shorts the ^VIX and has historically skyrocketed. UVXY goes long the ^VIX and has historically tanked. I think SVXY essentially feeds on UVXY, but money keeps flowing into UVXY from investors looking for one-day hedges. Money flows into SVXY because it can profitably sell contracts to UVXY and the broader market.

I would love to find other funds with such an utter indifference to long-term value AND a liquid options market. However, I think most leveraged funds make at least some effort to control contango. UVXY is somewhat unique in its promise to lose money long term.

specialkayme

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Re: Fun with VIX options
« Reply #211 on: January 24, 2018, 02:19:28 PM »
I would love to find other funds with such an utter indifference to long-term value AND a liquid options market. However, I think most leveraged funds make at least some effort to control contango. UVXY is somewhat unique in its promise to lose money long term.

Perhaps my inability to comprehend lies in my attempt to match/compare the fundamentals behind UVXY to other leveraged ETFs, when there is no comparison.

In any event, thank you for the explanation and the patience. It is greatly appreciated.

hgjjgkj

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Re: Fun with VIX options
« Reply #212 on: January 24, 2018, 02:54:31 PM »
XIV trade is not doing that well right now btw

eudaimonia

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Re: Fun with VIX options
« Reply #213 on: January 24, 2018, 03:42:04 PM »

Perhaps my inability to comprehend lies in my attempt to match/compare the fundamentals behind UVXY to other leveraged ETFs, when there is no comparison.


UVXY is a derivative of a derivative product and is nothing like other leveraged ETFs. Volatility products are a unique little niche unto themselves.

XIV trade is not doing that well right now btw

I was out of XIV on Friday. Since then we've seen the back month VX futures rising in a pattern that shows short term concern about long-dated SPX option prices. Also the SPX skew has decreased significantly indicating that ATM options are starting to become properly valuated again. Translation is that there is some short-term risk on the horizon although nothing that indicates a break in the long-term bullishness of the SPX.

hgjjgkj

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Re: Fun with VIX options
« Reply #214 on: January 24, 2018, 03:52:51 PM »

[/quote]

I was out of XIV on Friday. Since then we've seen the back month VX futures rising in a pattern that shows short term concern about long-dated SPX option prices. Also the SPX skew has decreased significantly indicating that ATM options are starting to become properly valuated again. Translation is that there is some short-term risk on the horizon although nothing that indicates a break in the long-term bullishness of the SPX.
[/quote]

To be clear are you looking at the % contango in periods 3-8 on Vix Central, noting that it is decreasing, and then bailing out?

http://vixcentral.com/

I pulled historical from Friday and compared. Though I am not sure what the box labeled Month 7 to 4 contango means but it decreased as well...

eudaimonia

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Re: Fun with VIX options
« Reply #215 on: January 25, 2018, 09:10:34 AM »


To be clear are you looking at the % contango in periods 3-8 on Vix Central, noting that it is decreasing, and then bailing out?

http://vixcentral.com/

I pulled historical from Friday and compared. Though I am not sure what the box labeled Month 7 to 4 contango means but it decreased as well...
[/quote]

Essentially you are correct; however, it is difficult to see the differences in the back months on vixcentral. I'm using TOS to do my analysis.

MustachioedPistachio

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Re: Fun with VIX options
« Reply #216 on: January 30, 2018, 06:21:25 AM »
I've been on the sidelines a bit over a month now. It's been interesting keeping an eye on it all, however. My paper trading account is giving me a good idea of the roller coaster ride. :)

talltexan

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Re: Fun with VIX options
« Reply #217 on: January 31, 2018, 08:54:13 AM »
UVXY has really spiked lately: my options position ($9 puts) went from up $150 to down $150 over about the last ten trading days...Hope you guys are hanging in there and staying strong with the strategy.

ChpBstrd

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Re: Fun with VIX options
« Reply #218 on: January 31, 2018, 11:13:13 AM »
UVXY has really spiked lately: my options position ($9 puts) went from up $150 to down $150 over about the last ten trading days...Hope you guys are hanging in there and staying strong with the strategy.
This is also a good demonstration of delta on long term options. My puts only moved down a few percent, even as UVXY threw a tantrum. Today (UVXY down 3.5%) they're mixed with bid-ask spreads of 6-7c.

Financial.Velociraptor

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Re: Fun with VIX options
« Reply #219 on: January 31, 2018, 02:54:43 PM »
UVXY has really spiked lately: my options position ($9 puts) went from up $150 to down $150 over about the last ten trading days...Hope you guys are hanging in there and staying strong with the strategy.

I'm down a trivial amount.  It is a hassle having to wait longer but I've waited UVXY out before.  It has never failed to return to wicked contango.

talltexan

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Re: Fun with VIX options
« Reply #220 on: February 01, 2018, 08:10:22 AM »
I put in a lowball bid on some September options during the spike as a kind of weak "rebalance". I don't think they got down low enough that my order executed.

ILikeDividends

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Re: Fun with VIX options
« Reply #221 on: February 02, 2018, 05:53:29 PM »
UVXY has really spiked lately: my options position ($9 puts) went from up $150 to down $150 over about the last ten trading days...Hope you guys are hanging in there and staying strong with the strategy.
I've got just a bit less than 2 years of life left in my puts.  I'm yawning through this spike. ;)

talltexan

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Re: Fun with VIX options
« Reply #222 on: February 05, 2018, 08:12:44 AM »
UVXY got high enough that my bid for a September put option just tripped. Current total exposure still about $600 in a taxable account, but cost basis for that is now about $860. Dividends will replace most of that over the seven months between now and September.

starguru

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Re: Fun with VIX options
« Reply #223 on: February 05, 2018, 02:28:32 PM »
Well I bought before when UVXY was between 9 and 10.   I have the January 2019 PUTS.  Not sure how bad this situation is but I’m not worried.  Yet.


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eudaimonia

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Re: Fun with VIX options
« Reply #224 on: February 05, 2018, 04:35:44 PM »
Hope folks kept their short-vol positions modestly sized today. XIV is particularly out of whack being down 80% in the overnight market.

jacquespluto

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Re: Fun with VIX options
« Reply #225 on: February 05, 2018, 04:45:48 PM »
XIV likely just triggered it's "termination event" in the prospectus.  It will be interesting to see what the implications are if that's the case.

ILikeDividends

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Re: Fun with VIX options
« Reply #226 on: February 05, 2018, 04:54:41 PM »
UVXY was in the 9ish area when I paid $4.30 for my 2 year 6 strike puts a few weeks ago.

Today, with UVXY now above 22, today's last trade on those same options was at $4.08.  It really is astonishing to see such a trivial difference with the underlying up over 100% since I put the trade on.  If I only looked at the price of those puts, I would think that not much of anything has happened over the last two days.
« Last Edit: February 05, 2018, 05:06:39 PM by ILikeDividends »

ChpBstrd

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Re: Fun with VIX options
« Reply #227 on: February 05, 2018, 06:57:35 PM »
UVXY was in the 9ish area when I paid $4.30 for my 2 year 6 strike puts a few weeks ago.

Today, with UVXY now above 22, today's last trade on those same options was at $4.08.  It really is astonishing to see such a trivial difference with the underlying up over 100% since I put the trade on.  If I only looked at the price of those puts, I would think that not much of anything has happened over the last two days.

Yes, it is nice not to be holding a February expiration right now, which is why we don't play with the short duration puts.

With the long duration puts, there's a certain sweet spot where the increasing volatility of UVXY's price offsets the increase in UVXY's price, resulting in an almost-wash even as all hell breaks loose in the markets. Do you realize your speculative option on UVXY lost less value in the past couple weeks (5.1%) than you would have lost putting the same money into the index (VTI down 6.4%)? 

spud1987

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Re: Fun with VIX options
« Reply #228 on: February 05, 2018, 08:41:11 PM »
VIX measures stock market volatility. It goes up when volatility goes up. Right now it is near an all time low (around $8-9) since the stock market has been steady and calm. When volatility rises, it spikes sharply. For example, in October '08 it hit $89.

I recently purchased some out of the money call options with a Feb. 2018 expiration at $20. This cost me $1.50 per option. If the VIX is less than $20 in Feb. 2018 I lose all my money. If VIX is $35 in February, I 10X my money.

Only a $2k investment (less than .2% of my NW), but I view this as insurance against a market downturn. Nearly all my money is in Vanguard index funds (60/40 stock/bond split), but sometimes I make some small speculative bets to try and hit it big.

OP here. I sold half my options back in November for no gain/loss when there was a slight VIX spike.

Kept the rest until today. I make about 5k in gains total. Not great compared to the 30k I lost in equities today, but I'm just glad my little experiment paid off.

hgjjgkj

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Re: Fun with VIX options
« Reply #229 on: February 06, 2018, 08:09:07 AM »
Does UVXY have a redemption provision as well?

RichMoose

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Re: Fun with VIX options
« Reply #230 on: February 06, 2018, 10:17:27 AM »
Wow! I don't know how people playing with this trade on this forum made out. But XIV and SVXY blew up! XIV might be dead and SVXY posted a NAV of just $4/unit yesterday. Incredible actually!

I'm so glad I got out of my VIX trade a few days ago when it hit my stop, lost less than 10% on that position.

eudaimonia

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Re: Fun with VIX options
« Reply #231 on: February 06, 2018, 11:09:20 AM »
Wow! I don't know how people playing with this trade on this forum made out. But XIV and SVXY blew up! XIV might be dead and SVXY posted a NAV of just $4/unit yesterday. Incredible actually!

I'm so glad I got out of my VIX trade a few days ago when it hit my stop, lost less than 10% on that position.

I made out quite nicely as I'd been out of XIV for the last couple weeks and long VXX. Made my yearly target in a day.

XIV and SVXY are were derivative of derivative products and there were a lot of retail traders who hopped on the bandwagon not understanding how these products traded (or could trade).

talltexan

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Re: Fun with VIX options
« Reply #232 on: February 06, 2018, 11:20:27 AM »
I've got June and Sep puts on UVXY, both of them have very large bid/ask spreads right now. Sigh.

eaknet

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Re: Fun with VIX options
« Reply #233 on: February 06, 2018, 01:22:05 PM »
I'll fess up.  I gambled. 

Before the close yesterday I bought UVXY in my Robinhood account.  Put in a market order to sell this morning at the open.  Gained 66% overnight.  I feel kind of dirty.

It was dangerous, it was rolling the dice.  Hopefully I'll have learned my lesson and won't do it again.

The only redeeming factor is I did it with a very small amount of $ and would have been OK losing it all. 

</fessup>

anisotropy

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Re: Fun with VIX options
« Reply #234 on: February 06, 2018, 01:33:28 PM »
Now that they are closing down XIV, what will we little people use to gain the benefits of decreasing volatility?

RichMoose

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Re: Fun with VIX options
« Reply #235 on: February 06, 2018, 01:40:20 PM »
Now that they are closing down XIV, what will we little people use to gain the benefits of decreasing volatility?
Haha! I must say that I've certainly learned a lesson on betting with synthetic futures products.

XIV went from $10 to $160 in around 17 years. It lost all of that in a week!

anisotropy

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Re: Fun with VIX options
« Reply #236 on: February 06, 2018, 01:42:31 PM »
I think it's really just one day (yesterday).

Let's have a moment of silence for these brave "investors", although if I remember correctly, Credit Suisse was the biggest bag holder. But ya, what can we use going forward that does what XIV did?

hgjjgkj

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Re: Fun with VIX options
« Reply #237 on: February 06, 2018, 01:51:37 PM »
Now that XIV died, can folks elaborate more on what their signals were and what led them to pull out?

RichMoose

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Re: Fun with VIX options
« Reply #238 on: February 06, 2018, 02:10:21 PM »
Now that XIV died, can folks elaborate more on what their signals were and what led them to pull out?
I got into the trade quite late and just dipped a toe in. About half a normal position for me. I set my stop a bit over 90% of my purchase price. After making a quick 20% gain on paper, it turned and hit my stop a few days later. Basically I lost less than 1% of my total portfolio on the trade. However, I am very, very happy that I set the stop where I did. If the stop would have been only a few percentage points lower, I would have got my position completely wiped out in yesterday's after hours trading. That would have equally a loss of around 8% of my portfolio! Something I would not have been expecting at all.

After seeing the crazy decay and lurches the VXX and UVXY had gone through in the past few years I did not want to touch those ETFs, even if just for a short term trade. They seem to go up 30%, down 40%, up 70%, down 50% in just days in high volatility environments. I just couldn't see a logical way to trade that.

Hope that helps.

talltexan

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Re: Fun with VIX options
« Reply #239 on: February 06, 2018, 02:16:56 PM »
This marketwatch article also explains what went wrong with the XIV trade overnight Monday/Tuesday

https://www.marketwatch.com/story/the-stock-market-swoon-heres-how-to-think-about-it-and-what-to-do-2018-02-06

jacquespluto

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Re: Fun with VIX options
« Reply #240 on: February 06, 2018, 07:33:27 PM »
Here's a good article describing what exactly happened with XIV and SVXY yesterday and how it spilled over to the market. 

https://realmoney.thestreet.com/articles/02/06/2018/how-xiv-and-svxy-went-rails-and-took-market-them?puc=twitter&cm_ven=TWITTER&utm_source=dlvr.it&utm_medium=twitter

I've traded XIV over the past year or so with a lot of success, so I'm bummed to see it go.  But clearly it was not able to handle a move in the market like we just saw.  My last trade was a 29% gain over 2 months.  Luckily I haven't had a position for a few weeks as my indicators turned south.   I'll be looking for a similar trade once things settle, but will probably utilize VXX puts instead.  The key thing in volatility trading is to keep position sizing small as the risk to lose everything is always possible.

I was actually very close to pulling the trigger on going long VXX shares Friday as the front month went into backwardation.  I missed a big gain as those would have paid out very nice.

thunderball

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Re: Fun with VIX options
« Reply #241 on: February 06, 2018, 07:38:31 PM »
I'm curious if this guy survived the last few days:

http://www.businessinsider.com/former-target-manager-becomes-millionaire-using-short-volatility-trade-2017-8

...or perhaps his old Target is hiring?

RecoveringCarClown

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bacchi

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Re: Fun with VIX options
« Reply #243 on: February 06, 2018, 11:44:29 PM »
Let's have a moment of silence for these brave "investors", although if I remember correctly, Credit Suisse was the biggest bag holder. But ya, what can we use going forward that does what XIV did?

Short the VIX future? Or sell the VIX calls?

I took advantage of the increased VIX and opened a number of RUT credit spreads.

anisotropy

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Re: Fun with VIX options
« Reply #244 on: February 07, 2018, 10:36:11 AM »
Let's have a moment of silence for these brave "investors", although if I remember correctly, Credit Suisse was the biggest bag holder. But ya, what can we use going forward that does what XIV did?

Short the VIX future? Or sell the VIX calls?


I was afraid so. Those are a tad too sophisticated, I am not particularly good at pricing. :(

Products like XIV made it soooo easy for noobs like me, just click buy/sell at the right time and money magically appears. Can we get it back after the end of this cycle please?

jacquespluto

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Re: Fun with VIX options
« Reply #245 on: February 07, 2018, 11:46:02 AM »
Let's have a moment of silence for these brave "investors", although if I remember correctly, Credit Suisse was the biggest bag holder. But ya, what can we use going forward that does what XIV did?

Short the VIX future? Or sell the VIX calls?



I was afraid so. Those are a tad too sophisticated, I am not particularly good at pricing. :(

Products like XIV made it soooo easy for noobs like me, just click buy/sell at the right time and money magically appears. Can we get it back after the end of this cycle please?

ZIV is still open.  Didn't blow up since it's an inverse of medium term volatility, not short term.  It is run by Credit Suisse.  Returns would be lower, but at least it held up through this mess.

ChpBstrd

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Re: Fun with VIX options
« Reply #246 on: February 07, 2018, 12:50:22 PM »
My long-duration UVXY puts are down, but not badly. I'm looking at bid prices 5-7% lower than what I paid for positions entered in the last few months, and my positions held longer than that are still in the black between 22-60%.  The thing which hasn't changed is that UVXY is still set up to lose 80-90% a year from trading losses and it would take a lot of volatility changes to overcome that. Essentially, all that has happened is the postponement of their next 5:1 reverse split.

To me, this seems like a safer bet than going long ZIV or SVXY because it's a bet on poor long-term strategic execution by a fund that doesn't even try to preserve value longer than a day. I'm looking at pairs trading VIX and UVXY or SVXY and UVXY to isolate losses due to strategy from VIX noise.

Stie Paie

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Re: Fun with VIX options
« Reply #247 on: February 07, 2018, 12:53:14 PM »
Looks Like I landed at the right topic. On Monday 3:45 PM I saw SVXY at $80, down ~30% !  (SVXY is short vol ETF) which was down almost -30$.   So I thought it was relatively less risk to short SVXY PUTs at $40 ( half price). I sold 30 PUTs for Feb 9 Expiration at $3 a piece.  If SVXY stayed above $40 I would have gained  $9000. Who would have thought VIX would double 15 minutes later.

However, in 30 minutes after market close, SVXY tanked. It was halted. I lost $55,000 next day. I had this in my IRA and got wiped out clean. Play safe. e

Billions of $$$$$ lost on the Vol complex (WMDs)  this week.
« Last Edit: February 07, 2018, 01:13:10 PM by Stie Paie »

hodedofome

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Re: Fun with VIX options
« Reply #248 on: February 08, 2018, 02:42:48 PM »
I have a running short on VXX that I try to keep about 10% of my trading account. I only add after spikes in VXX. Unfortunately I got a little impatient and aggressive over the past 6-8 months and added to my short in the past month. Now all the profit I've made in VXX over the past 1.5 years is gone and I'm about 10% underwater.

Hopefully the market correction isn't too bad and this all gets sorted out soon. Although the uptrend has been a little too strong lately, this correction has been extremely quick. For the S&P to be down 12% in just a week, from all-time highs, is pretty abnormal. You would think the correction would be over sooner than later, as I feel this has gone too far too fast.

If there was a news event, like some sort of crisis in the world, you could understand. This feels more like 1987, where there were market forces too far on one side that created this event. If we're like 1987, then the big plunge was basically the bottom.

hodedofome

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Re: Fun with VIX options
« Reply #249 on: February 08, 2018, 03:24:59 PM »
Also note, EXIV is still trading and is 'only' down 42% for the year.

The volatility crisis is much more a U.S. thing than a European thing.