I trade TVIX and XIV, TVIX has really held up the last few trading days where I thought it was heading a lot lower, today its back above $17, really waiting for another August 24th to unload all of my TVIX which would probably trade somewhere north of $25+ if the VIX got back to previous highs of 45-55 range....but its going to take much fear to drive that vix to new highs, new 52 week lows on the indexes would certainly do it...
These are complicated products with several layers of derivatives built into them, and the only way to successfully navigate them is to have a systematic approach based on quantifiable signals and then ride it through good times and bad. As someone who's been trading these products every day for years I can tell you there's been dozens of days when things don't seem like they add up. Trust me though, there are reasons why they move the way they move, but you really have to pop the hood and understand everything that's going on below the surface. There are ways to catch most of the good days while eliminating most of the bad days though.
No clue what OP is talking about because if you check the historical data, futures were actually bid up on the 25th, albeit slightly......
Exactly. VIX products are extremely popular now and if you look at the liquidity in some of these markets (VXX especially) its clear that they dont operate via 'randomness': no one would invest in something that was not derived from any set of mathematical principles. I too have been trading Vix products for a while and to those who are looking to get into them, make sure you truly understand what drives changes in VXX/SVXY/XIV/UVXY before investing. If you cant explain why any of those indicies moved up or down on a particular day, you should not throw your money at them. Make sure you understand how the Vix and its futures move together and understand that all of these products are derived from front month futures and will move independent (although not unrelated) to the Vix or the market as a whole.
The same general principles apply to trading futures, stocks, bonds, or trading these volatility ETF's directly. Rule number friggin one is make sure you understand how they operate. This should be obvious to people, don't trade products you don't understand, but it's amazing how few people who do trade these products actually know how they work. They are always so surprised how the prices move around, as if it's somehow unexpected. The problem is most people just have no idea that these products don't derive their prices based on the usual supply and demand factors of regular stocks and indexes. They also are incorrect in thinking they somehow "track" the VIX Index or something. They think if volatility is high you can simply short vol and make money. Or if volatility is low, you can just long vega and it's easy money. Nothing could be further from the truth. It is way more complicated than that. Trading futures is obviously a good method of gaining the same exposure and it's fine if that's what you're comfortable with, but as long as people do the work and understand the products, the ETF's are simpler. And many brokerage houses offer very low trade fees on them. I trade at Interactive Brokers and it's just a couple bucks to trade these ETF's. ZIV is even cheaper, but I stick to XIV / VXZ.
However that "simplicity" is why they do not even understand the products in the first place. Futures also give you flexibility in coming up with whatever bets on term structure you want - whereas the ETFs have fixed (and somewhat opaque) balances. It costs like 2$ to trade a VX contract, not exactly high cost.