been shorting tvix for the last month and making a killing but very careful to keep very tight stops and not get blown up
That's a silly generalization. Not all short premia strategies are made equal. In 2017 VXX went from 100 to 25. Not exactly pennies. For a passive investor there is a ton of convergence in the vix futures that can be "collected". It's much better if you are active and can hedge the tails effectively.
Great suggestion for monitoring hard to borrow names. I keep it simple with delta 1 bets on liquid names lately, so I don't look at options.
you are basically acting as an insurance provider by selling volatility - be prepared for steep losses every now and then - profitable long term
What would be an effective way to hedge a short VXX position? I have been studying this (and UVXY) for years but I can’t find any strategy with them that would give decent returns while being hedged. Calls for both ETF are always very expensive. Puts too.
I find hard deltas to be the best hedge. I often(not so much lately) run a short ES short VX futures pair if i see some decent convergence potential.
Out of curiosity, do you use proper var-swap (with appropriate adjustments) based deltas or some form of ad hoc beta?
Excuse my ignorance, but what do you mean with “hard deltas”? The problem of using short ES as a hedge is that the futures “beta” keeps changing, and in some cases even becomes positively correlated to VIX futures. I try to find something safer, like simply VXX calls when shorting that ETF or just buying puts directly.