Hello, The VIX & $ Index are two important markets but their volumes seem low. If you are trading these markets please share your experiences with respect to liquidity, spreads, etc. I see that the $ Index always has good side bid-offer volume, but actualy daily traded volume is low. I am still monitoirng the VIX. In sum, my question is: are these two markets liquid enough, viable for trading? Thanks!
Hey CP, VIX volumes are substantial for entries, but not enough to withstand a 500-lot hitting the bid. It can easily move 3 handles and those trades will not be busted. They bust at a figure like 30% away from the last trade. The majority (if not all) of busts are on drops. You can be in a consecutive switch (long APR/MAY for example) and see May drop 300bp and Apr go UNCH. You would need to withstand that 300bp move against your spread. It would be corrected in seconds/minutes, but a broker like IB may liq you on the $3k move. USDX is safer as it's easily replicated. Not that there is a ton of arb-volume, but it's not going to move even 2% on microstructure anomalies.
Thanks so much atticus... that's the kind of insight I needed and which you always provide. All the best to you!