i might buy calls on the vix going into this opex.. figuring it might even settle down into the 13's again by friday.. maybe i'm getting greedy.. who knows..
http://www.cboe.com/micro/VIX/vixintro.aspx Take a look at futures vs Vix. Not a good idea to buy calls unless you think VIX is going to shoot a lot higher, in the middle of summer, when nothing is happening. Even the August expiring just days from now is more than 10% higher than where the Vix is now, and as I write this it's going higher even though VIX itself is going lower. The others are higher still. Those options are on the futures for that month, folks. Remember that. And VXX and the rest are all based on the futures.
VXX is dead. Long live VXX. Market continues to rocket up, and nothing is going to stop it. Free money!
OK, so do it when it makes sense to be long the back and short the front. I mean, what do they define right now as the back month (real question, it depends on when they roll)? Sept, which is 31% higher than VIX, or Oct, which is more than 40% higher? See what I mean?
read the overview.. the http://www.proshares.com/funds/uvxy.html its a super short term roll on the futures.. meaning that they are constantly rolling there long position in the short term futures contract into the next term.... because of the term structure of futures.. there is a roll cost to this.. do not hold positions in these etfs for very long at all.. theres a loss due to the contango in the futures term structure..
So, as of right now (this is actually based on the S&P Vix Futures Index, which is calculated by doing this continuous roll) they are selling August and buying September, which they'll be doing until the 21st, at which point they start selling Sept and buying Oct. Given the current term structure, it would be insane to put any money into this. Look instead at XIV: this has a long-term positive record, and is a much more sane investment at the moment. As long as the term structure is in contango and steeply sloped, it should do well. Look at http://www.cboe.com/micro/vxv/, the three month volatility index. If you download the spreadsheet there, you'll see that this closed at 18.55, 30% higher than the VIX. I figure, off the top of my head, that XIV will probably do well as long as VXV is at least 15% higher than the VIX. After that, better to sell it, most likely. I haven't backtested this at all, but given the historical data available here and if you got your hands on XIV's historical data, you could probably do a pretty good job of figuring out a decent strategy with these ETFs. Bottom line, it's better to take the other side of the trade with these guys who suffer from the roll. When it goes into backwardation, you can do this UVXY or VXX, both of which would benefit.