Do you know which ETFs replicate cash vix? I do not like VXX because of carry due to front months vix higher than cash vix.
There's alot that could be said about this.. The way your phrasing your question leads me to believe you need to dive a little deeper into the nature of the term structure of volatility..
Go long contributions, and go short your smart ass. (Which I doubt you will do). I want something that follows this: http://www.barchart.com/charts/futures/VIY00 . CBOE S&P 500 VIX Cash (VIY00) 12.98s+0.17 (+1.33%) 7:42P CST (CFE) - Show Real-Time
I want be long the implied volty as priced in front options now, and no forward wind in my face. Check VXX. Always going down even when VIY00 goes up, because of the ongoing roll to next's month higher implied volty. I would not be surprised if you have been doing this trade for many months now, and of course probably did not mention it here. In addition, I do not want any volty stuffed in a BS model such as in SPY options. I want to be long only implied variance as priced now in the options, with no work to isolate it such as via hedging.
I don't think you understand. There is NO cash VIX. There is a futures contract that prices 30 day vol along a forward curve. All the ETF's are priced in some manner along that forward curve. The reason there is a "carry charge" on it now is because it's cheap. When the VIX gets really expensive it's goes into backwardation and trades at a discount. Let me put this another way, it does NOT give you free money. Everyone in the world understands it oscillates. So when it's cheap, the whole world would buy it and when it's expensive, the whole world would sell it (free money). So the product prices in that forward expectation. Think of it this way. FSU is 27-5 pt favorites over FL on Saturday. Which I think is too low. The whole world knows FSU is going to win outright. So in order to equalize the bet, you have to spot FL 27.5 pts. Now it becomes a 50/50 proposition. That is what the VIX is doing. You have to lay some pts on the upside if you want to buy vol down here because EVERYONE knows it's cheap. The question is, is forward vol a good buy given the forward premium that is priced in? Half the people here would probably say yes, half would probably say no. And there's your market.
Because your vol structure is decaying with time. The Vix futures are locking in a fixed 30 day vol term. It's stays 30 days even as you approach expiration. So you are isolating just the volatility and not the decay or the delta.
Ah. I deleted the post because it seemed too dumb to post. So, it's like I will always have a constant 30 day vol spread with no time decay. Rgr.
Right, there is no time decay. What you are doing is betting on a piece of 30 day vol at some point in the future. So for example, if you get long the Dec VX future at 13.80. You are saying that in 19 days, when this future expires, you think the 30 forward vol will be above 13.80. You could also think of it "roughly" as what the ATM vol will be on the Jan SPX options in 19 days.