I once bought some OTM long dated calls on SVXY. Based on historical stats it was approximately a 50% chance to ~4x my investment and 50% to lose it all. I lost the coin flip because it was a week before the Volageddon of Feb 2018. But it was a good trade. I only regret doubling down when it went against me. I blew up half my account, undid 5 years of crushing the S&P, got tilted and took two years off trading to focus on professional gambling.
Shorting the VIX
- Thread starter tradingpoker
- Start date
I’d go with options on VIX, this way you could cap your risk, which is essential because you don’t know how the options are going to behave. To model them, you should use the futures contract as an underlying not the spot. Also the greeks and P&L graphs before maturity that your broker provides are worthless, because they assume the spot vix as underlying, which it is, but you shouldn’t use it until you get closer to maturity. Sell and/or buy spreads, you will probably realize how hard trading the VIX is without blowing your account.
Contango and backwardation is the catch.
You are losing money when vix is slow to move or standing still.
Even tho you see vix index moving in ur direction you can easily still lose money
this would be true if trading the VIX futures/options right
I am talking about trading it via spread betting here in the UK. It's a very big here SB, has been for 30+ years. We get to trade the VIX spot/cash. You have to be from the UK is the catch, also it's tax free!
Lol, where do u think the pricing comes for your spread betting “spot” vix??
If ur logic holds true then wouldnt there be an arb opportunity between them?
We would all be rich without ever working, yeeey
I don't get it? I am short from around 60 ish, if it goes up I hold, but as always it's going down.
Even if it goes up I still hold, as it always comes back down pretty fast. Margin wise I am covered as long as it does not go to 200, VIX at 200?! hopefully not
Some people say the same about shorting stock. Are you one of those people? The logic is faulty since the upside not unlimited unless you are a complete idiot or the margin department is asleep.
Dont get me wrong, if u are short at 60, obviously you are making money, all i’m saying is that time is against you. What is the price now?
Same goes when the vix is low, then it's usually in contango, which means that future dated vix is more expensive therefore time is against you when you are long.
As with everything, you need to be right about TIMING. Being short vix is pretty much the same as being long the SP500 (i'm simplifying environments of course)
And when you look at last week's SP500 performance you'll notice it's up 13%+ in a week. When was the last time you saw that ?
All in all it actually made more sense to be long sp500 instead of shorting vix because being long the index in current environment makes time being on your side (not against you) due to backwardation.
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The surest way to go broke in trading is picking tops and bottoms.
At best it is a strategy which will up end up with dead money for a long period, unless you happen to get lucky.
Here is a secret about ET: Posters confuse skill and luck when discussing results.
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