Trading the Vix
(Chimp, 11
Points)
on 7/9/12 at 4:01pm
Anybody any experience trading the Vix in particular trading VSTX on the LSE? It tries to replicate the performance of the EURO STOXX 50® Investable Volatility Index. The overheads appear low enough and appears to be a useful strategy for hedging or as a trade itself. Any help appreciated.
Regards
Karl





Very volatile. I bought into
Very volatile. I bought into VXX a few weeks ago and got crushed.
If you are going to trade the
If you are going to trade the VIX i wouldn't encourage trading the ETFs because they inherently generate negative alpha in your portfolio unless you are going to be day trading them. Furthermore VIX ETFs experience a certain amount of decay every time the fund has to roll over it's futures contracts, and if the position is getting arb'd on rollover dates (most derivative based ETFs are) it just makes it worse. There is basically no way to profit off holding VIX ETFs in the long run, the only way to profit off of them is to day trade them. In fact if you read the prospectus for most VIX ETFs it will be clearly stated that holding these ETFs long term could cause your portfolio to lose a substantial amount of its value.
If you really want to use the VIX as a hedge buy actual VIX short term contracts but be careful as they are extremely volatile and are not necessarily vehicles meant for unsophisticated traders/investors.
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Futures Trader Man: If you
If you are going to trade the VIX i wouldn't encourage trading the ETFs because they inherently generate negative alpha in your portfolio unless you are going to be day trading them. Furthermore VIX ETFs experience a certain amount of decay every time the fund has to roll over it's futures contracts, and if the position is getting arb'd on rollover dates (most derivative based ETFs are) it just makes it worse. There is basically no way to profit off holding VIX ETFs in the long run, the only way to profit off of them is to day trade them. In fact if you read the prospectus for most VIX ETFs it will be clearly stated that holding these ETFs long term could cause your portfolio to lose a substantial amount of its value.
If you really want to use the VIX as a hedge buy actual VIX short term contracts but be careful as they are extremely volatile and are not necessarily vehicles meant for unsophisticated traders/investors.
Seconded. Look up TVIX and what happened with that. I would ONLY trade the VIX using options, but understand they are a different settlement than standard options. Only cash settlement and the way they trade is the implied future value of the vix at expiration, which is much different from other options. They also settle on wednesdays. I would understand the VIX inside and out, what it is, how it works and exactly why you are buying or selling volatility. Is it a hedge to the overall market? A single position? Frankly, if you are holding a position it is better to simply buy puts on your own position or even on the index than it is to buy the VIX. Grab a thesaurus and you'll find that the VIX and Gambling are synonyms.
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I am aware of VXX and its
I am aware of VXX and its disastrous performance but my query was regarding the VSTX on the LSE which appears a different animal. See two comparison charts i have uploaded title Trading the VIX Part II,
Regards
Karl
While I am not too familiar
While I am not too familiar with VSTX. VIX ETNs trading opportunities do arise in the short term, as there are spreading opportunities when VIX futures are in contango/backwardation. However, one is probably better off using these products as buy/sell signals on the overall market (SPX) rather than using them to hedge a portfolio. Personally, I would rather trade VIX futures outright, usually in the form of switches (calendars).
Doobs789: While I am not too
While I am not too familiar with VSTX. VIX ETNs trading opportunities do arise in the short term, as there are spreading opportunities when VIX futures are in contango/backwardation. However, one is probably better off using these products as buy/sell signals on the overall market (SPX) rather than using them to hedge a portfolio. Personally, I would rather trade VIX futures outright, usually in the form of switches (calendars).
You use the VIX as a buy/sell signal on the S&P?
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Revsly: Doobs789: While I
While I am not too familiar with VSTX. VIX ETNs trading opportunities do arise in the short term, as there are spreading opportunities when VIX futures are in contango/backwardation. However, one is probably better off using these products as buy/sell signals on the overall market (SPX) rather than using them to hedge a portfolio. Personally, I would rather trade VIX futures outright, usually in the form of switches (calendars).
You use the VIX as a buy/sell signal on the S&P?
No, some VIX ETN ratios can be used to assess market direction, not using any direct signals, I guess it wasn't proper terminology.