Trading the VIX future

[1a2b3cppp]

Quote from tomahawk:

You might also consider VXX or VXZ as alternatives to rolling futures every month. I believe VXZ is a little better correlated, but you still will never capture the exact % move of the VIX.

Here's ^VIX vs VXX vs VXZ.

 

[Fierze]

Quote from 1a2b3cppp:

Here's ^VIX vs VXX vs VXZ.

From what I've heard, the VXX and VXZ are less correlated with the VIX index than the pure futures are. Hence, I would prefer trading the futures even though that means rolling the instruments at significant cost.

 

[1a2b3cppp]

Quote from Fierze:

From what I've heard, the VXX and VXZ are less correlated with the VIX index than the pure futures are. Hence, I would prefer trading the futures even though that means rolling the instruments at significant cost.

Why would their be cost? Don't some futures brokers auto-roll over your contract? Or is that a separate instrument called a "continuous contract"?

What would be the costs associated with manually rolling it over? Two commissions?

 

[Fierze]

Quote from 1a2b3cppp:

Why would their be cost? Don't some futures brokers auto-roll over your contract? Or is that a separate instrument called a "continuous contract"?

What would be the costs associated with manually rolling it over? Two commissions?

There is not an actual "cost" (aside from two commissions) when rolling the contracts, but often a large difference in price level, eating away your profit potential.

For example, if you buy one VIX future which expires at level 16,5, the next months future may at the same time be at 17,5, so you might lose a point which would not be very good if you are bullish on volatility.

 

[1a2b3cppp]

Quote from Fierze:

There is not an actual "cost" (aside from two commissions) when rolling the contracts, but often a large difference in price level, eating away your profit potential.

For example, if you buy one VIX future which expires at level 16,5, the next months future may at the same time be at 17,5, so you might lose a point which would not be very good if you are bullish on volatility.

Ugh. They shoudl be equal.

So finding a broker with continuous VIX futures is the solution then.

 

[ogarbitrage]

There is no such thing as a "continuous contract." You have to roll futures and that is your cost.

 

[Butterball]

Chart the $VIX spot index vs. the VXX ETF. That gives you approximative answers to all your questions. VXX includes all backwardation, contract rolls and fees to simulate slippage on contract rolls.

 

[1a2b3cppp]

Quote from ogarbitrage:

There is no such thing as a "continuous contract." You have to roll futures and that is your cost.

Some brokers have continuous contracts that don't have to be rolled over.

 

[ogarbitrage]

Quote from 1a2b3cppp:

Some brokers have continuous contracts that don't have to be rolled over.

Then you're not trading VIX futures. You're trading a product they created and they're arbing you against VIX futures with your eyes wide shut.

 

[newwurldmn]

What products are these?

I only know of the VXX, VXZ, etc.

They are expensive, but cheaper than doing the roll yourself every night if that's what you want.