Shorting UVXY, TVIX, surviving, and profiting

I think some of you are overthinking this. If you want to short UVXY, buy UVXY puts. Stop monkeying around with VIX options as a hedge. They're just too disconnected.

I've traded UVXY short this way for a couple of years, and SVXY long with long calls as well. It's not hard. Sometimes the shit hits the fan and your long option rapidly goes to zero. Oh well.

Pay attention to the VIX futures and get out when the "risk" seems too great . . . maybe F2/F1 contango drops to 5%, or goes into backwardation, or whatever works for you. Stay small until you've ridden through a few vol shocks.

Be aware that deep backwardation is often a great buying opportunity. There is risk, though. No free lunch.
 
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jimmyjazz said:
I think some of you are overthinking this. If you want to short UVXY, buy UVXY puts. Stop monkeying around with VIX options as a hedge. They're just too disconnected.

I've traded UVXY short this way for a couple of years, and SVXY long with long calls as well. It's not hard. Sometimes the shit hits the fan and your long option rapidly goes to zero. Oh well.

Pay attention to the VIX futures and get out when the "risk" seems too great . . . maybe F2/F1 contango drops to 5%, or goes into backwardation, or whatever works for you. Stay small until you've ridden through a few vol shocks.

Be aware that deep backwardation is often a great buying opportunity. There is risk, though. No free lunch.
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Not everyone has the knowledge of how options work so they trade the etf directly
 
Well, I think that is very foolish. There's just too much risk, as we've seen this week. Trading these vol products without a hedge is ridiculous in my mind.

And let's not forget much of this discussion has been about hedging the ETF/ETN with VIX options, so options were already on the table.
 
HeSaidSheSaid said:
I love selling short UVXY, but stupid Etrade and Schwab keep cancelling my orders or saying they don't have shares available for selling short.
(I think eventually Barclay is going to close the time decay issue
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Happened to me Tuesday morning trying to short the hell out of VXX at $60!!!! Nope couldnt do it...missed out on huge gains!!! Now I just have to wait until the vix collapses to go long VXX under $20!
 
Saltynuts said:
See my post to JackRab - I think buying a proper # of VIX calls of the very nearest term would (assuming you did the math right and bought the proper #) cover you no matter how high you go. Maybe not if it goes to infinity, but even in a theoretical 2008 crash type scenario. As JackRab pointed out, this may be a money loser, however.
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Yeah I think constantly buying call to hedge with around 10% short interest rate, over 1000% capitial at account for margin call is not practical to win money. Just buying ziv makes more sense but i think even ziv would be closed to bust if market gets much worse for months.
 
If you short UVXY you're shorting a continual blend of front and back month VX futures meaning you also have to hedge both months to be on the safe side and that hedge needs to change as UVXY rebalances.

For instance, right now it's 23/77% weighted front/back VX so a UVXY short is basically 1/4 short VXG8 and 3/4 short VXH8. Even if you're able to somehow continuously balance this hedge on a daily basis (which will definitely add up fee wise) you're really just buying a blend of synthetic VIX puts on the same months UVXY is using (given simplified put-call parity formula: S = C - P, therefore: P = C - S) but doing it through an instrument you have no control over *plus* the settlement and execution risk of getting called away or some other kind of issue coming up.

Don't do it.
 
jimmyjazz said:
I think some of you are overthinking this. If you want to short UVXY, buy UVXY puts. Stop monkeying around with VIX options as a hedge. They're just too disconnected.

I've traded UVXY short this way for a couple of years, and SVXY long with long calls as well. It's not hard. Sometimes the shit hits the fan and your long option rapidly goes to zero. Oh well.

Pay attention to the VIX futures and get out when the "risk" seems too great . . . maybe F2/F1 contango drops to 5%, or goes into backwardation, or whatever works for you. Stay small until you've ridden through a few vol shocks.

Be aware that deep backwardation is often a great buying opportunity. There is risk, though. No free lunch.
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What is the advanage/disvantageof buy UVXY puts comparing to short uvxy? Never trade option before.
 
GloriaBrown said:
What is the advanage/disvantageof buy UVXY puts comparing to short uvxy? Never trade option before.
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Theoretical unlimited loss potential by shorting UVXY. Buying puts you are limited in your loss to how much money you used to buy the put.
 
i960 said:
If you short UVXY you're shorting a continual blend of front and back month VX futures meaning you also have to hedge both months to be on the safe side and that hedge needs to change as UVXY rebalances.

For instance, right now it's 23/77% weighted front/back VX so a UVXY short is basically 1/4 short VXG8 and 3/4 short VXH8. Even if you're able to somehow continuously balance this hedge on a daily basis (which will definitely add up fee wise) you're really just buying a blend of synthetic VIX puts on the same months UVXY is using (given simplified put-call parity formula: S = C - P, therefore: P = C - S) but doing it through an instrument you have no control over *plus* the settlement and execution risk of getting called away or some other kind of issue coming up.

Don't do it.
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Do you not find that the Beta Slippage caused by the way they rebalance and the leverage that they use make up for it's short comings? With VIX options, you have to be right on all aspects of the trade and moves against you do not work in your favor. Over a month or longer period of time with UVXY as long as vol doesn't constantly stay bid up, it is guaranteed to be lower once vol starts to decline. This isn't necessarily the case for the VIX. I haven't traded VIX options very much though so I would be interested in hearing if you disagree.
 
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