i think you guys will see less rolling costs due to term structure going fwd in near term for those who try to trade this product.
It's all about RELATIVE rolling costs (like VXX vs VXZ)... But you're right... lots of people are on to this... The RELATIVE roll yield between short and medium term has narrowed. That's why you have to be scalping and capturing a spread somewhere... No matter what you are doing.
he is referring to the term structure, and he is right. the contango has lessened a bit for 1m-2m contracts.
think about walking up that slope.. its exhasting! haha thats why the vxx / vixy is constantly losing value.. roll cost.. a quick snap in the other direction with a vix spike gets it going for you with backwardation in the futures.. doesn't happen that often.. you bleed to death first.. unless your the ultimate at calling the unknown unknowns.. <a target='_blank' title='ImageShack - Image And Video Hosting' href='http://imageshack.us/photo/my-images/689/termstructure.png/'><img src='http://imageshack.us/a/img689/1229/termstructure.png' border='0'/></a><br>Uploaded with <a target='_blank' href='http://imageshack.us'>ImageShack.us</a>
Here's a really neat, simple site: http://vixcentral.com Note how backwardation has now increased in the mid-term to 4-5%... Where, historically, it was once pretty flat.
It's still there and also more intense in the euro-VSTOXX futures. Is it because of Christmas or is it model dependent? (or something else) Would you think it's enough to trade it, if hypothetically you only rely on the spread for a trading signal
I've done some backtests and you can trade it, but if it flips to backwardation you get whacked. Hard. And it's doubtful you could time that.