(it's not my job to educate you ) I'll let history do the talking as to the facts of xiv being a good short from here. If you think I'm wrong then by all means take the opposite trade.
"DeeDeeTwo Registered: Dec 2007 Posts: 490 08-16-12 09:48 PM Quote from trefoil: 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. You don't understand XIV. XIV is designed to inverse track VXX *** INTRA-DAY ***... That means from 9:30 to 16:00. XIV does not track anything over the long term... Because you have to rebalance DAILY to VXX.... And you are paying huge rebalancing costs... Which is similar to paying 10%/month in VXX roll yield. Both VXX and XIV are designed to go to zero... The former due to roll yield... the latter due to rebalancing cost." this is the kind of posts which make for a good chat board. your opinion is worthless, whether it is right or wrong, if it does not offer backup. you have no track record and are part of random noise.
nice cut n paste job. ok , So school me on why xiv is not a good short from here. Don't forget to make "this is the kind of posts which make for a good chat board."
Same reason VXX wasn't a good long, No supportive argument was given, nor timeframe, nor target nor stop. It was an ambiguous call.
The point here is not to make a fool of the Southwest guy (whether he is or isn't is up to the reader to decide), the point here, for me, is that the term structure of the VIX is heavily in favor of shorting the futures, as crazy as that sounds with the VIX so low. Believe it or not, after Friday's action, VXV is more than two standard deviations above its normal relationship to VIX, which is a neat little shorthand for how steep the curve is. And the curve actually got steeper on Friday. There's more to this stuff than just the level of the VIX.
I'll go on record here that I'm short avg price 13.56. I'd rather be in early, than out missing it. I guess those who disagree with me probably have shorter time horizons. IMHO the only thing that's going to boost xiv much higher is central bank interventions.
Specifically which month of futures are you claiming to favor shorting from here? Otherwise your claim is a bit vague. Besides your analysis of vix and vxv is not very convincing to me. What makes you so sure later dated futures are going to move towards the earlier?
Sure the vix could stay low and the futures term structure could make it seem like clear as day that shorting the futures term structure makes complete sense.. TILL IT DOESN'T.. risk is not down... lots of blow out risk shorting the term structure right now... when vol picks up.. its really going to pick up... sure it slows down like a freight train coming to a stop.. but it blows up out of no where.. my better sense tells me .. find a ratio backspread to trade in the futures... keep putting it on for a small credit... keep letting it expire.. keep my exposure long to a vol spike.. way better risk to reward..