Karen the Supertrader - TastyTrade Hybrid Experiment

Discussion in 'Journals' started by Sweet Bobby, May 18, 2016.

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  1. newwurldmn

    newwurldmn

    So you are short about 600k of notional. that's pretty big in my opinion but unlikely to kill you. You could realistically see a 10% type drawdown on that.
     
    #671     Sep 23, 2016
  2. newwurldmn

    newwurldmn

    Implied borrow going out to Jan17 is 1.5% yield (like 30bps cost). and that's hitting the bid on a jan17 combo.
     
    #672     Sep 23, 2016
  3. I certainly have exposure if there is a sudden crash. I accept the risk. The "plan" is to liquidate all positions at a 5% drawdown. That's how I have it written on paper. We shall see how that plan works in the heat of battle. Nonetheless, I think it is good to have rules of guidance in place to help me deal with the emotional aspects of trading this strategy.
     
    #673     Sep 23, 2016
  4. newwurldmn

    newwurldmn

    5% drawdown in equity or market gap event?

    I agree it's good to have a plan. You should study your pnl for various gap events: -2,-5, -10 and -20% (all with some vol increase assumption). We all know it's unlikely you will see a 20% overnight selloff and will probably see a few 10% selloffs in your lifetime, but it's good to know what your convexity risks are. You can decide how much of that gap risk you want to take on.
     
    #674     Sep 23, 2016
  5. Maverick74

    Maverick74

    Is that the general borrow rate or the specific rate for that ETF. Different stocks have different borrow rates. I seem to recall in the past it was north of 10% but that number moves up and down as shares become harder to locate.
     
    #675     Sep 23, 2016
  6. newwurldmn

    newwurldmn

    Borrow rate for the VXX implied by the jan17 options.
     
    #676     Sep 23, 2016
  7. Maverick74

    Maverick74

    That number changes a lot. But sure, if one can get a locate and attractive rates I'm indifferent to VXX or XIV. I wasn't making a stock recommendation, I was posing the question if one simply wants to sell vol, there might be a better way to do it then then making 20 to 40 transactions per month across 3 different products along with tax consequences and commissions.
     
    #677     Sep 23, 2016
  8. sle

    sle

    Completely off topic, but I have not seen VXX borrow rate above 1.5% since 2011 - if there is juice in the borrow rate, you can arb it via VIX futures. It's a pain (since you are rolling it daily ) but at some rate it makes sense.

    On topic, I think the OP is carrying a bit too much risk for the strategy. Unless he has cash waiting in the wings in case of a vol blowup. Just an educated IMHO.
     
    #678     Sep 23, 2016
  9. Maverick74

    Maverick74

    I don't know how reliable this post is but this guy claims the lending rate at IB for UVXY was 15% as recent as last year.

    https://www.reddit.com/r/TradingForAdults/comments/3dk163/trading_the_vix_perpetual_short_edition/

    I know that's not VXX but I seem to recall very high lending rates on all volatility related ETFs. This is on top of their overall cost of borrowing which may only be 1.9%.
     
    #679     Sep 23, 2016
  10. newwurldmn

    newwurldmn

    UVXY has a higher borrow as to most of the 2x and 3x etns. Current borrow on UVXY is about 5-6%. That's an all in price if you trade the synthetic. a particular broker might charge you more for a locate but unless you need the actual physical shares you are better off just trading in the synthetic market. Locates are a pretty opaque business and lightly regulated.
     
    #680     Sep 23, 2016
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