I say HOGWASH!
The VXX and XIV have price correlations just like other securities and can be traded as such with proper TA.
The VXX and XIV have price correlations just like other securities and can be traded as such with proper TA.
*****Official VIX Exchange Traded Products thread******
- Thread starter Victory5
- Start date
On very short time frames you can - it will follow pretty close to the SPX. Longer time frames (weeks) the carry becomes the bigger deal. Over 2015, both the XIV and the VXX lost money despite being inverses of eachother. And the generic 1st month vix future rallied 50 cents from 18 to 18.5.
I disagree.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.
Apparently, you think your beliefs are absolute fact.
Everyone thinks they are a genius in a bull market.
Now, please explain how the last input is determine. You really think that Q(Ki) has nothing to do with supply and demand?
Also, how are the strikes determined for
Below is a link to the white paper.
http://www.cboe.com/framed/pdfframe...§ion=SECT_MINI_SITE&title=VIX+White+Paper
I will write a brand new definition for the VIX. Please feel free to prove me wrong.
VIX (this is overly simplified) = A formula to determine or a reflection of the supply and demand of supply and demand. I.E., a reflection of supply and demand of calls and puts of the S&P 500 which is a reflection of supply and demand for the 500 or so stocks in the S&P 500.
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No I do not. The reason I'm right isn't because I believe it to be true. It's because it is backed by evidence and facts and has proven to be true. There is no authority, there is only truth. And in the world of trading, what works in the the real world.
You can draw your lines on your UVXY chart and SPX chart all day long, it doesn't give you strong signals to trade the product. I fully understand you think it does, but you are mistaken my friend. Thats the only way I can say it. I'm not being condescending, I'm not being arrogant, I'm simply saying in the simplest most polite way I can.
If a person said the earth was flat, I would politely say: "No sir, you are mistaken." I'm simply saying the same thing to you.
Don't get offended, don't take it the wrong way. I hear your words, I do not accept them as true, and I'm saying that as politely as I can.BTW: Defining the VIX index a) has nothing to do with anything in this thread and b) in no way makes you sound smarter. I honestly have no idea why you posted that. Anybody with 20 seconds and an internet connection can post the same thing. Was there a point to it?
TA has a very wide definition and in some ways you could technically say most indicators are TA in some form, so let me be more precise and mention a few things that do give good signals for potential future movements of XIV, VXX, UVXY, SVXY, ZIV, VXZ, TVIX, and all the rest...
- The slope of the VIX futures term structure
- The ratio of the VIX to the VXV
- The ratio of the VIX to a 30 day constant maturity of the VIX futures
- Comparisons of different time periods of historical vol vs implied vol on the SPX
- The ratio of the VIX to the average true range of the SPX
- measured moves of the VVIX
- speed of the VXST
- tracking market depth of vix futures open interest
For obvious reasons I won't tell you my main 4 indicators and the ones that have proven most successful for my own trading, but the point is, notice how none of those have anything to do with drawing lines on a chart?
They are not support and resistance lines. They are not Q(Ki). There is no MACD, no CCI, no RSI, no Fibonacci, etc. I made no mention of price action of the SPX or price action of the underlying vol product. Why? Because those things are coincidence at best.
In the world of successful long term trading, coincidence indicators are meaningless. Now sure, there will be several times when you draw your pretty lines and crossovers and you get a signal that turns out to be correct, but so what?
Correlation does not imply causation !
I've noticed a lot of mass murderers had mustaches. I guess you're going to tell me that mustaches cause people to murder right?
Now, feel free to trade the XIV and related products any old way you like. I get my signals straight from the horses mouth, but you can get yours from all the indirect coincidental TA sources you choose. Weak signals means weak results in the long run.
How about we agree to disagree? I will continue to trade under the belief that drawing lines on a chart is silly. And you can continue to trade based on your lines.
I know at least one of us will be happy with the results
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You guys really have me thinking here. Seems to be some kind of communication breakdown. Let me try again with another example.
- Let's say for the sake of argument that you could use TA on the SPX and predict with 100% accuracy the future price movements. Even if you could do that, you'd still only get about 75% accuracy on your UVXY signals because the correlation is only that. In the last 2 years it's at 82%, but I've seen periods where it's as low as 70%.
- On the flip side, if you could predict with 100% accuracy the direction the VIX futures are converging towards expiry, you'd have 100% accuracy in predicting the UVXY or any other vol products.
Do you see the difference?
Now obviously you can't predict 100% price movement. In a more realistic world of 60% or even 70% using TA on the SPX, that will mean your actual UVXY signals are around 50%, maybe lower. This will not give good long term trading results. Vol products are portfolio vaporizing products. 50% just won't cut it.
If you could predict 60% or 70% accurately the direction of convergence of the VIX futures, you'd have 60% or 70% success rate in your trading. In the long run this would lead to good results.
So my ONLY point here was when I saw that guy literally drawing TA lines on a chart of the SPX and chart of the UVXY, I thought huh, this guy isn't aware of what really causes the price of UVXY to move. He thinks it's supply and demand and price action, and it's not. Maybe I could do him a solid and correct his error. It wasn't to be argumentative or arrogant. I'm just trying to point him in the right direction. Maybe get better signals in the future? Make more money !
Why would anybody choose to focus on signals that are 3 levels away from the source and only 75% correlated, when they can so easily focus on signals that are 1 level away from the source and 100% correlated?
Makes no sense to me. Apologies if I've offended anybody but I do in fact have vast experience with these products. (shameless self promotion)
- Let's say for the sake of argument that you could use TA on the SPX and predict with 100% accuracy the future price movements. Even if you could do that, you'd still only get about 75% accuracy on your UVXY signals because the correlation is only that. In the last 2 years it's at 82%, but I've seen periods where it's as low as 70%.
- On the flip side, if you could predict with 100% accuracy the direction the VIX futures are converging towards expiry, you'd have 100% accuracy in predicting the UVXY or any other vol products.
Do you see the difference?
Now obviously you can't predict 100% price movement. In a more realistic world of 60% or even 70% using TA on the SPX, that will mean your actual UVXY signals are around 50%, maybe lower. This will not give good long term trading results. Vol products are portfolio vaporizing products. 50% just won't cut it.
If you could predict 60% or 70% accurately the direction of convergence of the VIX futures, you'd have 60% or 70% success rate in your trading. In the long run this would lead to good results.
So my ONLY point here was when I saw that guy literally drawing TA lines on a chart of the SPX and chart of the UVXY, I thought huh, this guy isn't aware of what really causes the price of UVXY to move. He thinks it's supply and demand and price action, and it's not. Maybe I could do him a solid and correct his error. It wasn't to be argumentative or arrogant. I'm just trying to point him in the right direction. Maybe get better signals in the future? Make more money !
Why would anybody choose to focus on signals that are 3 levels away from the source and only 75% correlated, when they can so easily focus on signals that are 1 level away from the source and 100% correlated?
Makes no sense to me. Apologies if I've offended anybody but I do in fact have vast experience with these products. (shameless self promotion)
No I do not. The reason I'm right isn't because I believe it to be true. It's because it is backed by evidence and facts and has proven to be true. There is no authority, there is only truth. And in the world of trading, what works in the the real world.
You can draw your lines on your UVXY chart and SPX chart all day long, it doesn't give you strong signals to trade the product. I fully understand you think it does, but you are mistaken my friend. Thats the only way I can say it. I'm not being condescending, I'm not being arrogant, I'm simply saying in the simplest most polite way I can.
If a person said the earth was flat, I would politely say: "No sir, you are mistaken." I'm simply saying the same thing to you.
BTW: Defining the VIX index a) has nothing to do with anything in this thread and b) in no way makes you sound smarter. I honestly have no idea why you posted that. Anybody with 20 seconds and an internet connection can post the same thing. Was there a point to it?
TA has a very wide definition and in some ways you could technically say most indicators are TA in some form, so let me be more precise and mention a few things that do give good signals for potential future movements of XIV, VXX, UVXY, SVXY, ZIV, VXZ, TVIX, and all the rest...
- The slope of the VIX futures term structure
- The ratio of the VIX to the VXV
- The ratio of the VIX to a 30 day constant maturity of the VIX futures
- Comparisons of different time periods of historical vol vs implied vol on the SPX
- The ratio of the VIX to the average true range of the SPX
- measured moves of the VVIX
- speed of the VXST
- tracking market depth of vix futures open interest
For obvious reasons I won't tell you my main 4 indicators and the ones that have proven most successful for my own trading, but the point is, notice how none of those have anything to do with drawing lines on a chart?
They are not support and resistance lines. They are not Q(Ki). There is no MACD, no CCI, no RSI, no Fibonacci, etc. I made no mention of price action of the SPX or price action of the underlying vol product. Why? Because those things are coincidence at best.
In the world of successful long term trading, coincidence indicators are meaningless. Now sure, there will be several times when you draw your pretty lines and crossovers and you get a signal that turns out to be correct, but so what?
Correlation does not imply causation !
I've noticed a lot of mass murderers had mustaches. I guess you're going to tell me that mustaches cause people to murder right?
Now, feel free to trade the XIV and related products any old way you like. I get my signals straight from the horses mouth, but you can get yours from all the indirect coincidental TA sources you choose. Weak signals means weak results in the long run.
How about we agree to disagree? I will continue to trade under the belief that drawing lines on a chart is silly. And you can continue to trade based on your lines.
I know at least one of us will be happy with the results
I acquiesce. You a right. I see the difference. I mean you have all that experience in stuff and are a professional. Yeah, I mean vol products have nothing to do with supply and demand. It is just all about a formula that you have figured out with your superior intellect. Thank you for teaching me.
As you stated, correlation does not imply causation as clearly demonstrated in the charts below of XIV and SPY.
Clearly, XIV and SPY look nothing alike anyways. I mean it is not like they look almost identical. As you said, there is no way someone can use TA to trade vol products.
Man! If I could only get your super secret indicators, then I can trade vol products.
So do you really think that premiums paid for options which are some of the inputs for implied vol and other various models have nothing to do with the underlying?
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Oh man, so now I'm speaking to somebody that doesn't understand the difference between two charts that closely track each other, and daily correlations for trade signals?
Well, it won't ever be said this forum isn't entertaining. You post a chart showing they track each other and that's somehow a point? Do you know how many charts track each other that STILL have lower correlations? I'm sorry, but is this your first year of trading?
The correlation between the SPY and XIV is no where near high enough to get trading signals from the SPY. I'm honestly beside myself shocked that you think it is. Just jaw open, speechless.
I have to exit this circus show, it's too much. There's just way way too much that needs to be unpacked for you.
"Man! If I could only get your super secret indicators, then I can trade vol products."
Don't fret my friend, you can. They are publicly available. Every live trade I've made, and every trade I'm going to make given in real time. Check my profile for details
Well, it won't ever be said this forum isn't entertaining. You post a chart showing they track each other and that's somehow a point? Do you know how many charts track each other that STILL have lower correlations? I'm sorry, but is this your first year of trading?
The correlation between the SPY and XIV is no where near high enough to get trading signals from the SPY. I'm honestly beside myself shocked that you think it is. Just jaw open, speechless.
I have to exit this circus show, it's too much. There's just way way too much that needs to be unpacked for you.
"Man! If I could only get your super secret indicators, then I can trade vol products."
Don't fret my friend, you can. They are publicly available. Every live trade I've made, and every trade I'm going to make given in real time. Check my profile for details
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I can't leave this alone, there's lessons to be learned here for others.
So we've already seen how a person who perhaps has a degree in fine arts attacks a problem of correlation. They plot two lines on a chart and say see, they look the same. Sorry, I have a math degree, I need to put numbers to it.
Test #1: Momentum
- If the SPX is positive for the day, at market close buy XIV. If negative, buy VXZ
December 2010 - January 2016 results: 10,000$ turns into 4,439$
non starter. Apparently the momentum of SPX says nothing about tomorrows vol products.
Test #2: Mean reversion
- If the SPX is positive for the day, at market close buy VXZ. If negative, buy XIV
December 2010 - January 2016 results: 10,000$ turns into 7,449$
Again, nothing here. Every day is a new day with these products.
Test #3: THE REAL TEST
- If the SPX is positive for the day, jump into your time machine, go back 8 hours, and buy the XIV. If the SPX ends the day negative, get into the Delorean, go back to the market open, and buy VXZ
- We'll introduce a random 66% successful analysis scale to your SPX predictions, meaning 66% of the time you're right and 33% of the time you're wrong. I think that's realistic. I've averaged 3 different scales starting on 3 different days because there were big differences due to some large XIV up/down days.
December 2010 - January 2016 results: 10,000$ turns into 53,415$
* My guess is in real time, results would be flat. 10k ---> 10k but without a Delorean we won't ever know.
And just for a benchmark. Follow VTS trades signals:
December 2010 - January 2016 results: 10,000$ turns into 103,764$
So should these terrible results surprise us? For anybody who understands what correlation really means in a mathematical sense, no.
Since launch, the statistical correlation between SPX and XIV is 82%, meaning there are lots of days when these two move in opposite directions. On a shorter intraday timeframe it's even worse so no signals could be trusted there. On a longer time frame the roll yield kicks your butt, again no signals there.
Conclusion: You should not rely on TA on the SPX to get any signals what so ever for trading volatility products. It is a coincidental correlation, there is no causation, it's the tail wagging the dog, etc...
I've already said TA is VERY useful in other trading styles so this has nothing to do with bashing TA. I'm not a guy who bashes TA. It's absolutely vital in fact to some areas of trading. But why you choose to jam a square peg into a round hole and suddenly think that because TA works over there, it works for vol products as well is beyond me.
If you take the time to learn what really moves these products, and the best places to get your signals, you'll find your results are a lot stronger over time.
Hopefully there was no offense, the explanation was clear, and perhaps this thread could move towards talking about the best place to get actionable trade signals?
So we've already seen how a person who perhaps has a degree in fine arts attacks a problem of correlation. They plot two lines on a chart and say see, they look the same. Sorry, I have a math degree, I need to put numbers to it.
Test #1: Momentum
- If the SPX is positive for the day, at market close buy XIV. If negative, buy VXZ
December 2010 - January 2016 results: 10,000$ turns into 4,439$
non starter. Apparently the momentum of SPX says nothing about tomorrows vol products.
Test #2: Mean reversion
- If the SPX is positive for the day, at market close buy VXZ. If negative, buy XIV
December 2010 - January 2016 results: 10,000$ turns into 7,449$
Again, nothing here. Every day is a new day with these products.
Test #3: THE REAL TEST
- If the SPX is positive for the day, jump into your time machine, go back 8 hours, and buy the XIV. If the SPX ends the day negative, get into the Delorean, go back to the market open, and buy VXZ
- We'll introduce a random 66% successful analysis scale to your SPX predictions, meaning 66% of the time you're right and 33% of the time you're wrong. I think that's realistic. I've averaged 3 different scales starting on 3 different days because there were big differences due to some large XIV up/down days.
December 2010 - January 2016 results: 10,000$ turns into 53,415$
* My guess is in real time, results would be flat. 10k ---> 10k but without a Delorean we won't ever know.
And just for a benchmark. Follow VTS trades signals:
December 2010 - January 2016 results: 10,000$ turns into 103,764$
So should these terrible results surprise us? For anybody who understands what correlation really means in a mathematical sense, no.
Since launch, the statistical correlation between SPX and XIV is 82%, meaning there are lots of days when these two move in opposite directions. On a shorter intraday timeframe it's even worse so no signals could be trusted there. On a longer time frame the roll yield kicks your butt, again no signals there.
Conclusion: You should not rely on TA on the SPX to get any signals what so ever for trading volatility products. It is a coincidental correlation, there is no causation, it's the tail wagging the dog, etc...
I've already said TA is VERY useful in other trading styles so this has nothing to do with bashing TA. I'm not a guy who bashes TA. It's absolutely vital in fact to some areas of trading. But why you choose to jam a square peg into a round hole and suddenly think that because TA works over there, it works for vol products as well is beyond me.
If you take the time to learn what really moves these products, and the best places to get your signals, you'll find your results are a lot stronger over time.
Hopefully there was no offense, the explanation was clear, and perhaps this thread could move towards talking about the best place to get actionable trade signals?
Being long XIV recently has been very painful. The VIX futures curve has been in contango, although now it is almost flat between June and July. Usually XIV has done well when there is contango. With SPY down 0.5%, XIV down 11.7% is an outsize move. Are people who are short VIX futures (either directly or through exchange-traded notes) being forced to cover?