Can UVXY/TVIX "malfunction" like XIV and SVXY?

Discussion in 'ETFs' started by Saltynuts, Feb 6, 2018.

  1. Maverick74


    They all work. But there is a cost to holding a strong mean reverting product otherwise it would be free money.
    #41     Feb 6, 2018
  2. ET180


    Actually, you're right. I got confused. When I trade VIX, I always sell spreads (put spreads if I expect volatility to go higher or call spreads if I expect vol to drop). Therefore, I collect a premium and the time decay works in my favor. VXX works the opposite because one is presumably indirectly buying VIX calls. So yeah, you're right about the time decay.

    Although if I wanted to trade volatility, I'd rather just buy calls directly on the VIX so that I can choose the right expiration and strike for my expected move.
    #42     Feb 6, 2018
  3. Saltynuts


    I understand this Maverick, makes sense. Reading up on the VIX index, it looks like it is very much the equivalent of buying a VIX future with a 30-day-in-the-future expiration date. So selling one would seem very similar to just selling a VIX as close as possible to being 30 days out. Sounds about right?
    #43     Feb 6, 2018
  4. S2007S


    It would be totally free money....even if you held onto vxx for 5 years under 10 you know eventually it's going to surge 3-4 fold in due time....

    As for the other vix products they don't work as good as they should.....when you are tagging a product to the futures far out in advance they never seem to work out as they should... hence backwardation and contango.....

    As for xiv shutting shouldn't....they should keep it ipeo after the collapse and let it run the way it has.....
    #44     Feb 6, 2018
  5. Saltynuts


    S20075, I think if you are buying/selling futures you are subject to basically the same backwardation and contango issues that VIX futures face, no? Maverick covered that I believe at least kinda-sorta earlier in this thread.
    #45     Feb 6, 2018
  6. Which products are you referring to?
    #46     Feb 6, 2018
  7. I get it
    I think it is also about etf using daily percentage to calculate
    Lets say vix future raise 100% in a day which was basically what happened
    The etf drop to around 10% of original price
    Then it would need to raise 1000% to original value
    But short vix future can "hold" to its original value.

    Short vxx would be much closer to short vix future and almost no "bust" chance?
    #47     Feb 7, 2018
  8. Saltynuts


    Maverick is talking about XIV and SVXY I believe.
    #48     Feb 7, 2018
  9. Maverick74


    Any product that uses a daily rolling structure.
    #49     Feb 7, 2018
  10. Maverick74


    Well...maybe. For example, say you shorted Feb with 8 days to go and it spiked going into expiry at say 35. So then you try to sell March to catch the retrace but March is trading at 20. Would you sell march VX at 20? You missed out on that 15 pt retracement.

    The best way to capture the fallback would be to simply sell SPX puts. They will get crushed hard on any rally and you have time decay working in your favor.
    #50     Feb 7, 2018