+1 what I would like to have is something like: y=f(x) In order to understand how the index is computed once and for all. If the index contains different assets that can be replaced i would also like to know the algorithm that is use for doing that. These are stuff done from machines and machines understand only algorithms. The more I look for that the less I am capable to find... But maybe i am looking in the wrong place
WELL .. if you figure that out haha let me know.. cause i'm sure they don't want everyone to be able to exploit their buying sequence.. i would love to team up wiht a few people and dump when they are dumping the front month and buy when they are buying the back month! haha
Because pro traders are not gamblers as you suggest... They provide liquidity and capture spreads... You know, just like a casino. Many ETFs and ETNs have decent $0.04 to $0.07 spreads... Others have huge roll yield that can be captured... And, most importantly, they can all be easily hedged.
The VXX is a synthetic 30 day VIX... Created by using the 2 front month futures... And adjusted every day using days to expiration as a factor. I posted a link to an Excel workbook in this thread... That does this all the way back to 2004... It is easily reverse engineered.
This is a nice starting point, thx. I do not want to do a philosophical discussion but if you advertise ETFs as a transparent asset you should really be transparent till the end. If you do not make explicit the way the index is computed (note that i am saying the index and not the ETF that is tracking it) will be easy to find some work around to play with the investors of the ETF. On the other hand, if you are not playing with them there will be always the suspect. Now a less philosophical question... if you do not know exactly how the ETFs is going to behave (you do not know the algorithms) how would you evaluate the risk of the operation that you are going to perform?
well that volality of volatilty is going to be higher or lower then roll cost... thats basically how i am playing it..