I'm long XIV, since it usually follows the S&P well. Some friends have said this is both a good and bad idea. Any thoughts? Yield?
As long there is a backwardation in Vix futures, XIV looses daily money by rolling over.(VXX daily makes money) Thus situation normally happens once in a blue moon but if it lasts for 1-2 weeks with daily 30-40% increase in VIX, XIV can become Zero! From 16+ (27th July), it has fallen below 8 till now. I lost money in XIV last week but I cut loss immediately. Intraday it is still tempting (if you get the turn right) 5 to 10% gain . ($800-1000) on 1000 share ($8-9000 investment) Even making money in VXX puts is difficult due to the high option pricing. Only spreads on VIX Futures option is tradeable.( read Atticus trades)
I was looking at XIV also. I found an alternative that will work better in certain conditions. IVO, another inverse VXX, with the position taken a different way. I think they close the position if it hits $10 though, not sure the chances of that happening, but it's not too far from it at this point.