Trading volatility (VIX & Co)

SavedByTheBell said:
I wouldn't expect anything positive from these guys like Muppet, Overnight etc. They are here only to ridicule and pull down the noobs. They are always telling what doesn't work but never anything about what works. Stop asking for advice publicly before you lose your confidence and give up trading altogether. Now, just wait for the fireworks.
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Pathetic first post.
 
MrMuppet said:
First of all, it does not matter if an asset can crash or not. All it matters is the price of the insurance. If I can sell a 25 delta put for 5$ on a 7$ stock why would I care if it crashes or not.

The put is so overpriced that selling it is like buying a 1:5 dice roll with a 10$ payout for 3cts.

You are falling into a noob trap, my friend. First, just because the VIX cannot crash does not mean that leveraged ETFs cannot. They are derivatives, meaning they are not a 1:1 representation of the VIX. When the VIX doubles in a day, a 2x leveraged long ETF will make 200% and a 1X leveraged short ETF will go to zero. This happened already and buyers of the leveraged short ETF got their ass handed to them, although they only wanted to bet on the fact that vol will come down eventually.

Second, when everyone asumes that an asset cannot crash land, what will that do to the price of the puts? Do you think you can sell an expensive put and collect the decay? When nobody bets on a crash, nobody will buy puts and that makes them cheap.


VIX products have their purpose, don't get me wrong. They have a build in decay but they are NOT bets on the VIX. They are bets on autocorrelation of the VIX. When autocorrelation is high, they will trend a lot. When VIX is choppy, they will decay a lot.

You can daytrade them like some do, but if you're planning on putting them into your portfolio, you better know what you're doing.


Summary:
- Know your product! Read the prospectus and if you're not 100% sure if you get the construction of the derivative, don't trade it.
- You only can make money in trading when you buy cheap and sell expensive. Now you have to ask yourself, well what's expensive and what's cheap...and figuring that out is 100% of the work of a trader. So stop predicting and start to build valuation models, either quantitative or fundamental.

I don't know how often I already posted this but here we go again:
Retail should stay away from trading complex competitive products, period. Find a niche market where you don't have to compete against a horde of whales, institutional players, quants and market makers. Markets that are too small to be interesting for the big guys, markets that nobody cares and writes about.

Small cap corporate bonds, microcap stocks, exotic currency NDFs, warrants, exotic options (if you got the math down), crypto, emerging market equities, the list is endless.
But all I see is monkeys who make it their lifes purpose to figure out where oil, treasuries, US large caps and the ES are headed to.

So why exactly do you want to trade a product that you don't understand against people who are 1000x smarter than you? If you cannot spot the sucker on the table, you are the sucker. So unless you can explain who and why someone is selling you those puts for more than they are actually worth, you have no trade here.
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Are exotic options and emerging markets really easier to read and trade than US large caps and indices?

I wouldn't even know where to start to look for penny stocks, emerging market equities or exotic currencies and options.
 
cesfx said:
Are exotic options and emerging markets really easier to read and trade than US large caps and indices?

I wouldn't even know where to start to look for penny stocks, emerging market equities or exotic currencies and options.
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That's exactly what I'm trying to say. You don't "read" those things, you figure out their fair value and trade when prices deviates from fair value while at the same time managing your risk. Guessing where price goes next as a single source of edge is a fools game
 
my advice to noobs is to ask their broker’s trading desk. You can get more help there than on ET without the ridicule,
if you are looking to make money. If your goal is to show you are the smart trader on this planet, noobs can pick up that attitude here.
 
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MrMuppet said:
So what would you prefer? Should I cheer him up and watch him lose all his money? Nobody will post a working strategy, especially not when it is about arbs, risk arbs and flow.
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I just prefer that you lose the attitude that you are showing here. Answer the question if you want to or just leave it alone. Have some decency and respect, that's all.
Anyway, I just lurk on ET looking for nuggets. First time, I had to say something as all this negativity is becoming too much.
Already spent too much time. I am out of here before I get sucked into this. You guys on the other hand spend all your free time here. Have fun, just keep it decent. Don't be too hard on the new guys, that's all I wanted to say.
 
KCalhoun said:
I daytrade uvxy daily, tvix before that and vxx long ago. Sometimes it's excellent, other times choppy. It's difficult to trade, but when it runs up during market selloffs it can be great.
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Would like to better understand how you manage your exit for your day-trade UVXY long. Just incase you care to share.
 
SavedByTheBell said:
I just prefer that you lose the attitude that you are showing here. Answer the question if you want to or just leave it alone. Have some decency and respect, that's all.
........
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Sounds like you are new to trading .... and understanding that markets don't play nice. A little reality from fellow traders is exactly what newbies should expect and want.
 
SunTrader said:
Sound like you are new to trading .... and understanding that markets don't play nice.
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Don't bother to guess about me. You think you are teaching noobs that markets don't play nice by being rude to them? Now, I know that's how you were treated back in the 80s but you have a choice now.
 
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