*****Official VIX Exchange Traded Products thread******

It seems you're not aware, so just a heads up. UVXY is a volatility product that derives it's price based on a set of rules. Doing technical analysis on the actual product or the SPX is worthless.

If you'd like to try to make educated predictions on where UVXY is going, or any of the other vol products for that matter you should start looking specifically at volatility, the futures term structure, the VIX, the VXV, the volatility risk premium, futures open interest and activity, etc.

There are ways to predict the direction of volatility products, but technical analysis isn't one of them.
 
VTS said:
It seems you're not aware, so just a heads up. UVXY is a volatility product that derives it's price based on a set of rules. Doing technical analysis on the actual product or the SPX is worthless.

If you'd like to try to make educated predictions on where UVXY is going, or any of the other vol products for that matter you should start looking specifically at volatility, the futures term structure, the VIX, the VXV, the volatility risk premium, futures open interest and activity, etc.

There are ways to predict the direction of volatility products, but technical analysis isn't one of them.
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Seems like everyone is an authority on this forum. So tell us, what is volatility? Also, please explain these rules. It seems like you are the one the is not aware.
 
Forget about authority, there is only truth. (having said that, yes I have spent several years trading volatility products as my job :) )


There is plenty of information on my own website (which I can't post here, but can be found in my profile) or you can search out any number of other sources for similar information.


I was only stating the obvious. Volatility products DO NOT derive their price based on supply and demand, and no amount of technical analysis will change the set formula for how it trades. For that, you have to go straight to the source, which is the term structure, the futures market, and the VRP.

My only point was to convey information, not to be argumentative. TA is very useful on certain products and in certain areas of the investment world, I have no issue with TA. Its vital in fact to many places such as day trading / ES trading. But NOT in the volatility product space.
 
The issue isn't that volatility itself can't be studied using technical analysis. Implied volatility is almost entirely determined by supply and demand. And most professional options traders trade volatility based on flows (supply and demand).

This issue is that the ETN's have an embedded carry component in them. They are like buying and selling a trading portfolio. And as the trading portfolio earns/loses carry, their value goes up and down. The only way for this portion of the value to revert is for the ETN to lose/earn more carry. This makes it hard to do a chart analysis on the ETNs over a long term, where the carry effects over that time period are greater than the implied vol effects right now. The VXX is down like 95% from inception despite the VIX and VIX futures being net higher in price terms.
 
VTS said:
Forget about authority, there is only truth. (having said that, yes I have spent several years trading volatility products as my job :) )


There is plenty of information on my own website (which I can't post here, but can be found in my profile) or you can search out any number of other sources for similar information.


I was only stating the obvious. Volatility products DO NOT derive their price based on supply and demand, and no amount of technical analysis will change the set formula for how it trades. For that, you have to go straight to the source, which is the term structure, the futures market, and the VRP.

My only point was to convey information, not to be argumentative. TA is very useful on certain products and in certain areas of the investment world, I have no issue with TA. Its vital in fact to many places such as day trading / ES trading. But NOT in the volatility product space.
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Well said.
 
newwurldmn said:
The issue isn't that volatility itself can't be studied using technical analysis. Implied volatility is almost entirely determined by supply and demand. And most professional options traders trade volatility based on flows (supply and demand).

This issue is that the ETN's have an embedded carry component in them. They are like buying and selling a trading portfolio. And as the trading portfolio earns/loses carry, their value goes up and down. The only way for this portion of the value to revert is for the ETN to lose/earn more carry. This makes it hard to do a chart analysis on the ETNs over a long term, where the carry effects over that time period are greater than the implied vol effects right now. The VXX is down like 95% from inception despite the VIX and VIX futures being net higher in price terms.
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First off, VXX is down 99.9% since inception, not 95%. Secondly, I really don't understand why people are so resistant to the utter simplicity of if. It's obvious you're an experienced trader, you probably know a lot about option trading, ES day trading, long term investing, all of that. Don't get me wrong, this is not argumentative or calling anybody out. It just doesn't appear that very many people are aware of the reasons why the volatility products are not like regular ETN's or stocks.

It's really so much simpler than you guys are trying to imply.

XIV derives it's price based on a set formula that is derived off the volatility futures market. Roll yield, not supply and demand is responsible for the majority of it's movements. That's it, that's as simple as it gets. There is a set buying formula based on a set time schedule and signals are coming from the same source day after day.

Figure out what drives it's price movements, and focus on that. TA on the products themselves or the SPX is meaningless.

You are making a very common mistake, which is to confuse correlation with causation. You can TA the hell out of the SPX, and sometimes you'll even get the right signal. So? Why would you care about what an indirect source is telling you?

Why not just get it straight from the horses mouth?

So sure, be my guest. TA the hell out of the products and the SPX, occasionally you might even get the right signal. If you want long term success though, you'll have to trade the product based on how it was mathematically designed.

TA will at best get you a coincidental correlation to it's daily price movements. Personally, I wouldn't bet a penny on coincidence. I'd rather develop a repeatable system based on the direct signals. But it's an open market, so anybody can jump on in and compete with me and the rest of those who make a living trading these products.
 
VTS said:
First off, VXX is down 99.9% since inception, not 95%. Secondly, I really don't understand why people are so resistant to the utter simplicity of if. It's obvious you're an experienced trader, you probably know a lot about option trading, ES day trading, long term investing, all of that. Don't get me wrong, this is not argumentative or calling anybody out. It just doesn't appear that very many people are aware of the reasons why the volatility products are not like regular ETN's or stocks.

It's really so much simpler than you guys are trying to imply.

XIV derives it's price based on a set formula that is derived off the volatility futures market. Roll yield, not supply and demand is responsible for the majority of it's movements. That's it, that's as simple as it gets. There is a set buying formula based on a set time schedule and signals are coming from the same source day after day.

Figure out what drives it's price movements, and focus on that. TA on the products themselves or the SPX is meaningless.

You are making a very common mistake, which is to confuse correlation with causation. You can TA the hell out of the SPX, and sometimes you'll even get the right signal. So? Why would you care about what an indirect source is telling you?

Why not just get it straight from the horses mouth?

So sure, be my guest. TA the hell out of the products and the SPX, occasionally you might even get the right signal. If you want long term success though, you'll have to trade the product based on how it was mathematically designed.

TA will at best get you a coincidental correlation to it's daily price movements. Personally, I wouldn't bet a penny on coincidence. I'd rather develop a repeatable system based on the direct signals. But it's an open market, so anybody can jump on in and compete with me and the rest of those who make a living trading these products.
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You are saying the same thing as me, just in a condescending manner.

I just said that implied volatility levels are a function of supply and demand and many institutional traders do trade them off of charts. Not the same charts that stock traders use as the processes are different.

You never mentioned the carry component which is what is a big driver of the performance of the ETN's in the long run. I tried to clarify that.

But you want to be called the expert so you can sell your VIX trading service, so you will nitpick on my return calculation. So carry on.
 
I certainly wasn't being condescending, or didn't mean to be at least so if it came across that way I'm sorry. And nothing I say is so I can sell a service. I'm a poster on a forum just like you are, just chatting. If people want to make money trading volatility products I'm sure they will stumble on to a few of the subscription websites that are out there (and I think they will choose the one with the best and most consistent returns available :) )

As to what you're saying about how institutions use TA to trade volatility, again that has nothing to do with XIV. The XIV or VXX are not volatility, they are only a part of what that word means.

If you feel the need to draw lines on an SPX chart, or a chart of the UVXY, you've missed the entire point of how these products work. And by you, of course I mean the guy that posted TA charts doing exactly that. Not you you, I mean anybody who does that. Waste of time, totally worthless.

I agree 100% that TA is useful in trading volatility in several forms. In stock trading, option trading, day trading, futures trading, what have you. I'm simply saying, in the form of the XIV and VXX, in those specific examples, TA is worthless.

Now I'm not saying this to be condescending so don't be sensitive. I'm simply saying, if you think TA is useful in trading the XIV or VXX, you are simply mistaken. That is all. The correlation is far too coincidental and weak to be of any use.

There are several far more reliable places to be getting trade signals. Why anybody would go to the 10th in line when you can just go to the front of the line is beyond me.

I'm am in no way against TA in many types of trading, including volatility trading. But specifically the XIV? No, TA has nothing to do with the formula for how it's price is derived or what CAUSES it's movement.

Correlation does not imply causation :)
 
VTS said:
I certainly wasn't being condescending, or didn't mean to be at least so if it came across that way I'm sorry. And nothing I say is so I can sell a service. I'm a poster on a forum just like you are, just chatting. If people want to make money trading volatility products I'm sure they will stumble on to a few of the subscription websites that are out there (and I think they will choose the one with the best and most consistent returns available :) )

As to what you're saying about how institutions use TA to trade volatility, again that has nothing to do with XIV. The XIV or VXX are not volatility, they are only a part of what that word means.

If you feel the need to draw lines on an SPX chart, or a chart of the UVXY, you've missed the entire point of how these products work. And by you, of course I mean the guy that posted TA charts doing exactly that. Not you you, I mean anybody who does that. Waste of time, totally worthless.

I agree 100% that TA is useful in trading volatility in several forms. In stock trading, option trading, day trading, futures trading, what have you. I'm simply saying, in the form of the XIV and VXX, in those specific examples, TA is worthless.

Now I'm not saying this to be condescending so don't be sensitive. I'm simply saying, if you think TA is useful in trading the XIV or VXX, you are simply mistaken. That is all. The correlation is far too coincidental and weak to be of any use.

There are several far more reliable places to be getting trade signals. Why anybody would go to the 10th in line when you can just go to the front of the line is beyond me.

I'm am in no way against TA in many types of trading, including volatility trading. But specifically the XIV? No, TA has nothing to do with the formula for how it's price is derived or what CAUSES it's movement.

Correlation does not imply causation :)
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Like I said earlier, we said the same thing: the price of the ETN is not like the price of a stock. The ETN historic price behavior has the carry it spent/received as part of it. So the fact that it rallied in the past doesn't mean anything. It just means that it earned a lot of carry in the past.

But if you want to study the entry and positioning of the implied vol figure - you can do that with some simple charts. After your entry, you will be subject to carrying costs/benefits so you must understand that.

I don't understand the correlation implying the causation part.
 
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