How is shorting VIX right now not free money?

[seakraken]

Looking at the trends, VIX tends to float around the 10-15% marks with spikes whenever outlier events occur.

Given it's elevation right now, it seems logical that it will fall back to earth in the next 18-24 months as the the situation improves, or at the very least, a new normal is established.

Hence, I'm wondering what is wrong with buying SPXY (leveraged short VIX) on margin (or LEAPS) and expecting at least a 50% gain in the most likely scenario.

Granted, I don't have the knowledge of all the future risk factors to come up with a risk adjusted return for this, but is there something I'm missing here?

 

[SanMiguel]

Leveraged short are rebalanced daily usually. So if the market goes rangey or sideways you'll be losing money.
VIX was at 80 in March so if we get another turn off events you could be under water a while

 

[Sekiyo]

If you short it with Other People Money then Yes.
Otherwise ... Nope.

 

[seakraken]

Leveraged short are rebalanced daily usually. So if the market goes rangey or sideways you'll be losing money.
VIX was at 80 in March so if we get another turn off events you could be under water a while

So leaving aside the issuing of rebalancing and taking a non leveraged inverse VIX ETF, you basically agree that it can yield about 40% return in 18-24 months conservatively if a new normal is established (or the old one returns...), with the obvious caveat I could be under water for some time?

 

[seakraken]

If you short it with Other People Money then Yes.
Otherwise ... Nope.

Can you expand on why it’s not a good idea in your opinion?

 

[Sekiyo]

Can you expand on why it’s not a good idea in your opinion?

Because there is more upside than downside ?

 

[Overnight]

Can you expand on why it’s not a good idea in your opinion?

Remember everyone that longed the XIV? Whoops!

 

[seakraken]

Remember everyone that longed the XIV? Whoops!

Unrelated, but one question about that...I get how the investors got wiped out when vol spiked feb 2018. But wouldn’t they have recovered their money had credit suisse and nomura not shut down the etf products? I mean VIX did fall back to earth in the subsequent months...

 

[seakraken]

Because there is more upside than downside ?

That’s true for shorting in general. Are you saying to never short anything with your own money?

 

[Sekiyo]

That’s true for shorting in general. Are you saying to never short anything with your own money?

There are great shorts.
But shorting the VIX right now ?
I wouldn’t do it with my own money.
Do you really believe it’s gonna go down ?
Plz, Give me your confidence on a scale of 5.

What level would you target ?
What time frame ?