I've been trading this pair (-150VXX+100VXZ) intraday (RTM). Starting after the flash crash in May 2010 it worked just beautifully for a couple of months. And then this nice predictable behavior suddenly disappeared. I don't see there any intraday mean reversion anymore. And yes, as the guy mentioned in the article above, the trend of the pair on yearly charts looks incredibly straight.
Look at the various spreads amongst the VIX futures. VXX constantly rolls from front month to second month - and must be getting killed on the roll, similar to USO used to (or still does...) VXZ rolls from 4th month to 7th month, maintaining average maturity exposure of 5th month. At this point in time, the spread between front month and 2nd month is almost double the spread from 4th to 7th. Couldn't this partly explain the consistent under-performance of VXZ? Look at a ratio chart since this things came out. Straight down.
Hi fredman007, I think it is very good pairs with good correlation and high cointegration. http://www.catalystcorner.com/index.../2010&dateto=10/18/2010&capital_employed=2000 I sold this pair once when it started diverging for DFM (diverge from mean) purpose and closed out on Oct. 14, 10 with 1+% profit for both side. For this bullish market it is better to wait until the pair starts reversion. I feel that this kind of market DFM is more profitable. My pair GLD/SLV was already stopped out several day ago waiting to go back in. Are you still holding yours. PA
Anyone know how to set a profit stop with a trailing limit with IB? Is it possible? Example, instead of setting a profit stop at $xx, I want to have a trailing limit of say, 10% activate at $xx. So I can capture additional profit, but if it drops 10% I sell at market. Walt B
High WB, I read your post on the above date. Would you please clearify that the pair that divert against the trend of the market or the trend of it's own ratio should do well. I think that the RTM pair is not doing to well in bullish market like now. Thanks, PA
How do you think about these Pairs. Long GLD Short SLV return 7.80% expected http://www.catalystcorner.com/index.../2010&dateto=10/19/2010&capital_employed=2000 Long TZA Short FAZ ( different sector) return 20.50% expected http://www.catalystcorner.com/index.../2010&dateto=10/21/2010&capital_employed=2000 Charts are self updating may not look the same tomorrow. PA