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DeeDeeTwo
Registered: Dec 2007
Posts: 623 |
06-24-12 03:48 PM
Quote from DeeDeeTwo:
To get back to the OP "is VXX a good buy".
Pros sell options for a living = sell time premium...
Often at highly inflated rates...
Likely because retail/public perception of future volatility...
Is always too high....
Or retail/public/hedge funds are willing to overpay.
Since VIX is based on SPX option prices...
Pros sell VIX and VIX related ETN/ETFs...
As a proxy for selling SPX options.
So the only intelligent question is...
"Is it a good time to short VXX"?
Cliff Notes = Pros always sell volatility or sit on the sidelines
http://www.surlytrader.com/volatili...ing-strategies/
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ksonsinc
Registered: Aug 2005
Posts: 1163 |
06-24-12 04:25 PM
I Lost my ass in TVIX
Have 1700 Shares @ $6.55 averaged from $8
Even with the downgrade and fear in the market with Greece , spain it just does not go up
Next time i would probably by sds , tza , or some index etff
TVIX , VXX is a big mistake
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sle
Registered: Apr 2003
Posts: 1610 |
06-24-12 11:27 PM
Quote from DeeDeeTwo:
Pros sell options for a living = sell time premium...
<< bla bla bla>>
Cliff Notes = Pros always sell volatilty
Pros both buy and sell convexity/risk premium. Unless you trading your own capital or have captive investors, you can't afford being either always long or always short risk premium.
PS. Given how steep the vol surface is, VXX is not a good buy.
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AAAintheBeltway
Registered: Oct 2001
Posts: 14600 |
06-25-12 05:22 PM
Quote from sle:
...
PS. Given how steep the vol surface is, VXX is not a good buy.
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?
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loufah
Registered: Nov 2001
Posts: 1130 |
06-25-12 06:49 PM
Quote from sle:
Do you at least understand that when you are trading futures, you are subject to the same risk-premium capture (positive or negative) as you are when you are trading ETFs?
Yes, but when you're long VXX and similar ETNs, you're facing not only the futures declining toward spot VIX but also the rollover penalty. Take the 2 week period before the front month futures expire. You may find that holding the front-month futures during this time period will result in a decline of 10%. Holding VXX may see a decline of more than 10%, because they are not only seeing a decline of their futures holdings but are continuously selling front month futures and buying the same number of back month futures contracts - which cost 8 to 15% more than the front month contracts - thus decreasing the overall value of their holdings.
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sle
Registered: Apr 2003
Posts: 1610 |
06-25-12 07:08 PM
Quote from loufah:
Yes, but when you're long VXX and similar ETNs, you're facing not only the futures declining toward spot VIX but also the rollover penalty. Take the 2 week period before the front month futures expire. You may find that holding the front-month futures during this time period will result in a decline of 10%. Holding VXX may see a decline of more than 10%, because they are not only seeing a decline of their futures holdings but are continuously selling front month futures and buying the same number of back month futures contracts - which cost 8 to 15% more than the front month futures- thus decreasing the overall value of their holdings.
There is no real difference in roll-down of the first futures to spot vs "roll-over" of the replicated constant maturity futures which is VXX. For an equivalent weighted vega position, you are going to be locking the same loss/gain over a long enough holding period. Some simple analysis of roll-down and roll-over should be enough to convince yourself of it 
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?
Off the top of my head, I could think of some trades in VXX options or some relative value trades in ETF vs ETF. It's more suitable for an off-line discussion, I don't want to pollute this thread.
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