Think or Swim, TVIX, premium, practice account
Greetings! So I've been using the think or swim tdameritrade platform for a practice account. At the beginning of the year I started with 10k and am now up to 36. I have made most the money from the TVIX, however, I saw recently that TVIX carries a premium price, and I think it is possible that the practice account doesn't even charge me the premium. Being that the premium is like an average of 3%, which would mean my numbers are way out of wack. I mean 3% would be like trying to buy at 6 but it really costing 6.18, right?
Or maybe I'm missing something.
Are you asking if you get charged to short TVIX when vol spikes?
ETNs have an explicit fair value based on the underlying index they track. The premium just means TVIX is currently trading far from that value.
Okay, thank you. So, the price just comes down to commission fees, and the bid/ask spread, but is not affected by the premium? I mean if the premium does not directly affect cost, then what is the big deal. On my practice account I just sold it when it went up 3%.
The premium obscures your bet. It is possible for the price of TVIX to not move even if the VIX moves, depending on market supply and demand.
Think or Swim is a really bad platform for both simulated and live trading depending on how active you are. In fast moving markets the platform will lock up and the way orders are routed (unless that's changed) it adds additional latency. The simulated trading is pretty bad because so long as the price gets touched, you get filled, which is far from realitic. Another ding, at least to me, was the software didn't breakdown your trades very well, so you have to manually keep track of your max adverse excursions etc, which can be a pain in the ass. On the other hand, the options suite is pretty cool.
TVIX. Can you tell me what the below means? Does this mean basically that the implied volatility (as measured by what people are buying and selling) is different than the historical volatility by .53%?
Also, is the premium .53% just an indicator, but not actually something that can be calculated in the spread or spot price?
GRR. Thank you for the help.
Bid/Ask/Spread 5.60/ 5.94/ 5.89%
Prem/Discount -0.53% Last Price 5.88
Haus are there any other reasons the think or swim platform is not accurate? The TVIX seems very liquid so i think that isn't such a huge problem since im not doing active fast trading. I mostly profit when the economy spikes or crashes and i go in at those times. But I mean if i have over 300% initial investment, I start wondering whether it was just a bit of luck or maybe it isn't accurate. Like for example are premiums accounted for and if i go long on tvix does it account for rolling over to another month and the extra cost?
Just curious as to why you're going for TVIX. I am not familiar with ToS but surely you'd be able to trade say Futures or options?
TVIX, VXX and other long vol products are pretty complex in their operation, and unless you have an idea about why you are trading these instruments, you'll end up getting burnt. I say this as you don't seem too familiar with ETP's - so I assume you don't understand the technicalities behind these products.
Like - you realise the way you're trading TVIX/VXX is basically a leveraged short of the market right? And that yes this is liquid, but hella risky, and hella convoluted.
Direct VIX Products (apologies for the roughness, CBOT for more info http://www.cboe.com/micro/vix-options-and-futures.aspx)
VIX spot, which cannot be traded, is caculated from the IV of SPX options. VIX Futures are the things usually traded, these are derived from FV of VIX spot, and are usually in pretty steep contango (lower front month than back month). VIX options are European style and based on the Futures and have a weird mechanism for calculating close price which will whipsaw you if you're not careful.
VXX is in essence weighted portfolio of the primarily the front two months of the VIX futures approximated as one month (http://investing.kuchita.com/2011/08/16/how-the-vxx-is-calculated-and-w…). This means that depending on where the month is, the behaviour of VXX will be different to the VIX futures, making it a crappy tracker of spikes/crashes and generally. You get the added bonus of getting destroyed by contango every day.
TVIX is worse. It is a synthetically leveraged product aiming at twice the % moves per day as the VIX short-term Futures. (http://sixfigureinvesting.com/tag/tvix/) Not only do you suffer from incredibly amounts of contango burn, you also suffer from what I inelegantly call 'percentage leakage' where, if the underlying futures make +2%, -2%, TVIX will not be where it started, but will be less (i.e. 1001.02=102.98=99.96), couple this with crazy level moves and there's no wonder why TVIX has had liek 3-5 reverse splits since inception.
So like... unless I had a specific vol-driven trade (i.e. short vol, UVXY etc - which is how most traders play it usually...with perhaps some form of signal to close the trade before a spike, and reverse) - then I'd really just be looking to use futures, or barring that options on sp500/nasdaq etc. Not only do you avoid the above issues, your initial issue with premium/discount (which is present in all funds - in fact it's an arb opp - as you'd short TVIX and long futures etc to squeeze out the premium to NAV...).
setarcos GammaMonkey Okay I don't quite understand everything you are all saying, but I will say this. I started with 10k and am at 30. I had half my position in TVIX when the economy was stable at all times. And what is the fear against TVIX really. Even if you lose 3% a month, it doubled three times this year. So as long as we don't have a great economy consistently, what is the fear really.
The rest of the money I made was from when /CL went below 40 that was an obvious investment for a day, 3k profit in a day there when I went in at 38. Then recently when the dow crashed, went in on the SVXY after the market stabilized for a few days straight.
I mean if you hold the TVIX and just sell when it doubles, what numbers do you all have to show that the risk outweighs the reward?
The market seems to always do the same thing. People freak out, then it stabilizes, then people get greedy and over invest until either they freak out again or there is some scandal, all of which result in the TVIX shooting up.
I mean people are wired to over reach and everyone struggles and wants to "get back on the horse" or chase some dream so what is the actual risk. I mean how do I calculate the actual risk?
What if we had a formula for this strategy: Buy TVIX anytime it hits an all time low, and put a limit order in for when it doubles to sell.
What am I missing? Also, instead of waiting till the end of the month to roll over TVIX futures, why not roll them over any time the premium/discount is more ideal? That way it mitigates the risk that maybe the premium jumps up to 9% on the day you have to roll them over.
I really apologize for my ignorance it is just annoying to be at 300% for the year, I can post the photo of my PL YTD for each fund. But basically you all are saying that the future will NOT be like the present. That the economy will some how smooth out and stop panicking.
Also, what about just starting out by buying TVIX at say 5.8, and putting an order in for idk, 6.3 or something, that way you get immediate profit that will cover all that contango expense for a while. Then buy it at 5.8 again and wait longer. I just wish it was easy to calculate EXACT risk.
I mean in vegas if you are 51% in favor technically you should bet and the only question is how much. So if there is an 80% chance the TVIX doubles within a year, and 65% chance it does it within 6 months, what is the real issue?
That seems like very reasonable risk to me.
1) It's good you're getting interested in trading, and you will learn a fair bit. 2) You need to do substantially more research however, especially if you ever decide to use 'real money' or you will get so burnt that you'll end up losing it all. 3) TVIX doesn't have futures, the VIX has futures, what are you referring to? VIX futures at a premium to Fair Value? Or the TVIX product at a premium to it's value? What are you even talking about? 4) Your trading strategy is historically based, and bets on a 'mean-reversion' of vol - this works sometimes, doesn't other times. There is no reason why TVIX wouldn't go further down than an all time low - it's not driven by supply/demand in the sense that everyone will by TVIX because it's 'cheap'. 5) 80% to double in a year... what? Where are you getting that number from? How can you possibly say it's 80%? Based off of what? Second, TVIX YTD return is -54%, aka if you were long TVIX at the beginning of the year and copped -54% loss, even if you doubled it at the end of this year (you know that 80% of the time) then you'd still have lost money. 6) Bottom line you're gambling, and statistically you'll either blow up or burn through your capital by waiting for the next VIX spike. 7) Surely you're a troll.
Also, just to be clear, the NAV premium/discount that you see is almost certainly not real. I suspect the deviation is a reporting error due to TVIX being marked at the regular close while VIX futures trade for an additional 15 minutes. I could be wrong but there are big, well known shops that arb the NAV difference with creation/redemption every single day.
Long story short, don't trade these ETFs/ETNs in your PA based on NAV deviations unless you're actually an expert in this trade.
thanks for these infos,I have learned.....
Okay so I went in at 5.88 and sold at 6.5. It is up to 7.27 now so will let it go down for a while. But i mean obviously this makes money if you time it well. I guess holding it until it doubles is overly ambitious, but i mean holding it until it makes 5-10%, now that seems very reasonable, especially with rumors of fed rate hike and all that happening. I won't know what to buy at until i watch it stabilize tomorrow. If it stabilizes and then the next day drops that is a totally different animal than if it just drops the next day, or stabilizes for two days.
Okay now its under 6 again. You've got OPEC and Fed rate scares, attacks, and you know volatility is artificially low due to holiday highs.
It is 99% chance that TVIX shoots up soon.
Sorry but people that are saying it is reckless are just wrong.
I get monkey poop yet anyone that went in when I said it, would have made a lot of money by now. These are obviously volatile times, so going in on the TVIX anytime it has went under 6 has been a very smart move. I get monkey poop for being right? I mean go check the numbers. Why penalize for being right?
The guy's a turbo arbitrageur!
I had to look up what that meant. No I don't do that. Isn't that called scalping? Haven't gotten into that.
@dontbugme It is fair play to say that the emotion is the biggest factor I'm missing. Thank you.
simulated trading means nothing. you need to put real money at risk and experience/learn how to manage fear, greed, uncertainty, etc. You sound like an overconfident noob that will probably blow up your account after a month of live trading.
bump
Anybody use Think or Swim? (Originally Posted: 03/17/2010)
I'm thinking about switching an account over to Think or Swim from Schwab. Barrons has given tos a pretty good ranking over the past few years and especially last week. Any thoughts specifically on this platform?
ToS is by far the best broker I've ever used.... great customer service, unmatched platform, very low commish. I like it better than IB and i know many others do too.
If you end up wanting to switch over let me know and we can split the $50 referral bonus :)
Relatively, ToS has pretty high commissions. Take OptionsHouse for example: Stocks: ToS- $5 min, OH- $3 flat Options: If high volume, ToS- $19.95+0.95x, OH- $8.5+.15x If low volume, ToS- $2.95*x, OH- $5 for 5
I pay $3 for up to 5k shares and $1.5 per contract. Theyre more than willing to negotiate with you if you give them business
Interesting. But what's your monthly stock and volume like?
i probably did 1.5k in commish last year. maybe 1-2 trades per day. they reduced my commish no questions asked tho
I've been using ToS for about 6 months and I love it. You can trade a lot of different products (I trade crude and nat gas contracts) and if you place more than 40 trades a month they refund you $39.95 to "pay for your internet". The platform is very user friendly, the mobile app is nice and as stated above, customer service has always been very helpful. They also provide webinars and some other tutorials on trading that I've never used, but kinda cool that its available.
not to mention they give you a TON of great stuff for free like the pit audio feed (costs $100+/mo to buy usually) and charts are unbelievably user friendly. I love ToS and would never switch to another broker.
I was wondering if they offer Forex options?
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