So, why are volatility ETFs such poor performers, given THIS?

Discussion in 'ETFs' started by Saltynuts, Feb 12, 2018.

  1. Thanks JackRab. But note the writer didnt incorporate those fees because he was NOT trying to mimic VXX. His test was shorting VIX and just holding the front month futures as a hedge. So at most that is missing commission wise on the hedge side is one trade a month.
     
    #11     Feb 14, 2018
  2. JackRab

    JackRab

    I'll have to re-read it then...
     
    #12     Feb 14, 2018
  3. Trader13

    Trader13

    What is the physical equivalent you trade? Gold?
     
    #13     Feb 14, 2018
  4. DeltaRisk

    DeltaRisk

    Orange juice *wink wink*
     
    #14     Feb 14, 2018
  5. Trader13

    Trader13

    Ah, OJ ... the secret sauce of the smart money.
     
    #15     Feb 14, 2018
  6. Thanks Jackrab!
     
    #16     Feb 14, 2018
  7. JackRab

    JackRab

    @Saltynuts, I don't think his study is correct....

    The fact that VXX usually drops is due to the fact that we usually see contango in VIX futures, with the sharpest decline is the nearer we are to expiration. So, the front month VIX future drop at a faster rate than the back month future.

    Which would mean, when he buys and holds the front month VIX future... it would decline in value more than the VXX, since VXX is composed of a combination of front and back month futures... depending on if we are near expiry or not.

    So with 30 days to go, VXX is full in front month, zero in back month
    25 days to go, VXX is 25/30 in front month, 5/30 in back month...
    etcetc.
    VXX gradually moves out of the faster losing future... so it should lose less than just holding the front month.

    I don't know exactly what the article writer has done... but it doesn't seem right to me.
     
    #17     Feb 16, 2018
  8. Is there a demonstrable and repetitive behavior to VXX over the course of a month?
     
    #18     Feb 16, 2018

  9. Yes, it is VERY weird JackRab. On another threads someone (maverick?) mentioned the long volatility funds "locking in losses" every day. That does not seem quite right to me, as if VIX goes up they are locking in gains, but it could have something to do with the rollover of course. Just weird.
     
    #19     Feb 16, 2018
  10. DeltaRisk

    DeltaRisk

    Minute Maid is tooooo expensive, we’re cheap. *wink wink*
     
    #20     Feb 17, 2018