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DeeDeeTwo
 

Registered: Dec 2007
Posts: 623

 

06-26-12 12:28 AM


Quote from sle:

Given how steep the vol surface is, VXX is not a good buy.



You are just saying VIX is in steep contango...
The only time you see backwardation is in deep crisis with the VIX above 30 or 40...
So VXX is pretty much never a good buy.

If you must go long...
Buy VXZ (mid term futures) or VXZ options...
The contango is much more limited.

If you are right the pop will be somewhat muted...
But if you are wrong you will save that 10%/month roll yield...
Overall a much better choice for retail.

Best of all is an Automated VIX ETN pairs or basket strategy...
But that is beyond the scope of this thread...
Google away.

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sellindexvol66
 

Registered: Apr 2008
Posts: 610

 

06-26-12 01:21 AM


Quote from AAAintheBeltway:

Could you elaborate on the last statement a bit please?

What is the best option for a retail trader looking to capitalize on a pop in VIX?



Anything but vix products unless you want to "try" make vix a full time job.

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sle
 

Registered: Apr 2003
Posts: 1610

 

06-26-12 02:22 AM


Quote from sellindexvol66:
Anything but vix products unless you want to "try" make vix a full time job.


Not really. I think if you are an experienced vol trader, you can easily dedicate part of your portfolio to vix (especially if you have experience with volatility derivatives) and keep doing other things at the same time.


Quote from DeeDeeTwo:
So VXX is pretty much never a good buy.


I can name a whole bunch of reasons to be long VXX vs some other forms of convexity. As I said before, naked outright risk premium is almost never a good buy nor a good sell.

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sellindexvol66
 

Registered: Apr 2008
Posts: 610

 

06-26-12 02:45 AM


Quote from sle:

Not really. I think if you are an experienced vol trader, you can easily dedicate part of your portfolio to vix (especially if you have experience with volatility derivatives) and keep doing other things part-time.



Lots of ifs in that statement....let these guys jump in, I could use the liquidity :-)

I also would go as far to say so called experienced guys have little idea how the curve really behaves.

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DeeDeeTwo
 

Registered: Dec 2007
Posts: 623

 

06-26-12 04:13 AM

This is useful for understanding VXX, etc...
Download the free Excel workbook that goes back to 2004...
And learn how it works...
(I'm not connected to this, it's some guy from Brazil):

http://investing.kuchita.com/2011/0...ble-march-2003/

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pistolpt
 

Registered: Feb 2012
Posts: 129

 

06-29-12 06:45 PM

VXX has lost 96% of it's value since inception.
Unlike a stock this does NOT mean it is "cheap".

You want to play it? Buy it for a couple days, maybe a week, but not longer.

You've got 5-15% of roll yield PER MONTH going against you.

Have at it hos'.

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