well, go long either the at the money or short the at the mony options on ES and delta hedge them dynicamically. Don't come complaining to me if you go broke in the proces ....
I knew there would be a resolution, I didn't know how the market would react I am never wrong, but often early at anyrate, congratulations on a good trade otherwise, it is poor form to rub it in the face of guys on the other side I don't predict what the market is going to do, I just tell you what I am doing, for conversation and fun, and hopefully profit
So, like, I developed a spreadsheet figuring there just hadda be a way to trade the VIX etfs. It had like 5 tabs with all kinds of interlinked info and complex relationships when I finally stopped. Never made me a dime. OTOH, directly trading VIX options has made me decent money, but only because I spent more time than any one should ever have to spend figuring out VIX options and futures. Like someone else said, not for 5 year olds. Sellindexvol66 speaks the truth. To add to his post: Avoid it, unless you have already traded vol via calendars & such & have actually made money that way, meaning you actually can trade vol directly without VIX futures and options. If you can do this, then give it a go, but go slowly and realize it will take way more time than you can possibly imagine to figure it out*. If not, don't bother. Also, the final answer is very simple once you do get it. Like IBM says, the answer, once known, is simple. But finding the answer? Not so much. [size=-2]*atticus probably got it back when he was as old as the E*Trade baby, but ya know, there's always the glorious exceptions.[/size]
The VIX isn't tradeable, but VIX futures and options on those futures are. VIX futures expire the 2nd or 3rd Wednesday of each month and represent traders' opinions of where the VIX will be on the morning of expiration. You may notice that VIX futures are almost always higher than VIX, and futures that are months further out are higher than the closer ones. This is called contango. This term structure is logical, because the state of the market is almost always less clear the further out you're looking. So these ETNs came along, and one common structure for them is to hold a blend of the front two months' VIX futures so that the ETN represents a VIX futures contract that is always 30 days away from expiration. VXX does this. Some ETNs invest in longer-term futures contracts, e.g. 6 and 7 months out. What most of these ETNs do is sell the earlier dated futures and buy the same number of later dated futures, a little bit every day. If there is contango, then they are going to lose a little bit of money every day. And if the futures themselves are higher than VIX, and VIX remains level, the futures that the ETNs hold are going to go down in price almost every day. So that's why these ETNs decay so much. A bunch of novice traders see VXX go down 1% every day for a few days straight and buy it because they think it's just like a stock under attack by shorts and will bounce right back... but it usually won't. So you'd think it would be easy money just to short these ETNs and ride along on their inevitable slide toward zero. But everyone else has the same idea, so they're hard to borrow, and you'll probably get a forced buy-in on the very day that they spike up 15%. You can buy put options on VXX, but they have large premiums - an at-the-money put 2 weeks before expiration costs around 5% of the underlying and has significant decay every day - and if VXX goes down because of improving market sentiment, the IV of those puts also goes down, and you're not making nearly as much in those puts as you expected.
As requested for 5-year old: 1. VIX tracks Volatility 2. Volatility goes up - VIX goes up. Volatility goes down - VIX goes down 3. There are many futures and ETFs because there are many providers (iShares, proshares and etc). Check those that are most liquid - have bigger volume an focus on them.