VIX vs. NQ

Discussion in 'Risk Management' started by Overnight, Jul 3, 2019.

  1. Overnight


    I've been wondering about a better hedge against an adverse equity move beside the amateur long one/short next idea in NQ (or anything else, like CL) because it's just an example of trying to pick a top or bottom but with the added benefit of being right 100% of the time on one leg, and 100% on the other. Close the right leg at the right time, and let the other leg recover.

    While I am getting more comfortable with it now, I am thinking it would simply be better to take a more nuanced hedge of say, long NQ and long VIX.

    Has anyone out there explored this strategy and used it to fruition?

    Note: This is for long-term swings, not day-trading.
  2. MattZ

    MattZ Sponsor

    Keep in mind that it's not always a 1:1 ration between VIX and NQ, I see traders adjust this based on the vol of the VIX.
  3. TommyR


    nuanced would imply vol weighted notional.
  4. Overnight


    Yes, I understand that. I am wondering if anyone out there has experience with what the ratio might work out to, and whether on NQ it worked as a hedge. Based on what I see on historical charts, a 1:1 is at least a start.

    I activated the extra data on my charts to look at the VIX and be able to trade the thing, so I was hoping for some insight on what to expect.

    But I tell you, that CL is in an amazing range right now, just fantastic on my old method. But I must find a new alternative. Like the VIX hedge. Grr. I hate my head.
    MattZ likes this.
  5. Overnight


    What I meant by nuanced was something a teeny bit more complicated than my bull-in-a-china-shop approach of long leg A in instrument, and short leg B in same instrument.
  6. REDP1800


    so wait you have a more complicated Nuance but want us to give you a notional ratio value including volatility? um...try googling it. lots of stuff out there in this age of informarion. there is no cash vix...theres a clue. i know your sensitive and searching. keep looking but find ways on your own. ratios do different things for different people. think ratio of air to fuel...everyone tweaks it for what they want to do. why hedge with vix.b4..its really needed. trade micros...until you make money again
  7. You better just cut your NQ when it goes wrong
    Vix can move like crazy in a day, no way you can use a norm or average to expect its movement
    comagnum, REDP1800 and dozu888 like this.
  8. tommcginnis


    I would want to plot (AND take a pierson's r of) each of:
    • NQ and VIX
    • NQ and VXN, and
    • NQ and [VIX - VXN]

    I think that might be mighty interesting. My guess would be the middle one (just because nominally it's more on target), but I'd be open to other results. {this is where the chin-scratching emoji goes...}
    Vehicle-wise, I would investigate taking a synthetic long position in VXN to hedge the long NQ.
    Snuskpelle likes this.
  9. dozu888


    hedging is a myth..

    a legit situation would be if you hold 500 stocks and you don't want to sell and buy back frequently so you hedge with futs...

    like others already said... just close the position..
    comagnum likes this.
  10. MattZ

    MattZ Sponsor

    VIX is based on the expected Vol in the S&P market. Now you want to add the NQ into the equation so you need to know the ratio on ES/NQ as well. This may get a bit cumbersome for a simple strategy.
    #10     Jul 4, 2019