Volatility Trade - countertrend

[misterkel]

Is there any or some degree of truth that volatility can be manipulated and controlled by
well....you know Citadel, Fed sock puppets , central banks and rally stake holders in general?
I am under the spell to some degree that volatility futures are a small market relative to the size of the aforementioned players and can be sold to reverse a correction in the underlying stock indexes.
Can anyone respond to this tin hat conspiracy theory?

Don't see how it would work - too many layers of separation. Volatility futures would have to push back through volatility (which is supposedly a derivative and marker of market movements, then that tail would have to wag the dog of the major indexes somehow?, which would push around the individual stocks. But since the process works in reverse of that, how could that happen?
But I don't see any manipulation as tin foil hat - if they can make money doing it, then they will.

 

[Maverick74]

Is there any or some degree of truth that volatility can be manipulated and controlled by
well....you know Citadel, Fed sock puppets , central banks and rally stake holders in general?
I am under the spell to some degree that volatility futures are a small market relative to the size of the aforementioned players and can be sold to reverse a correction in the underlying stock indexes.
Can anyone respond to this tin hat conspiracy theory?

Selling VX futures and forcing them down below their fair value will just bring buyers into the market for VX. It would be a gift for hedgers as they would be able to insure their holdings at cheap prices while their stocks were falling. If you ever see this happening, please let me know.

 

[sle]

Selling VX futures and forcing them down below their fair value will just bring buyers into the market for VX.

Not true Imagine this. Markets tank and the realized volatility increases above the approved levels. As an emergency responce, The Powers (see below for the complete list) come up with an emergency plan to keep the peasants content. They sell VIX futures in size. The supply of Vega from the VIX markets filters into the variance strip. Dealers, who took down this vol have to hedge and and start buying equities, thus bringing realized volatility down.

Of course, the amount of gamma the Powers sell would have to be a significant fraction of the total market volume. If the market volume is 6 trillion per day give or take, my estimate would be that they would have to start at 2 billion dollars of 1 month Vega equivalent.

The Powers: The Fed, Illuminati, Elders of Zion, the Rothschilds and, of course, Dr. Evil.

 

[ajacobson]

The manipulation is nicknamed "carpet bombing" in the SPX. Lot's of articles on the internet if you want to get a better understanding.

The interesting thing is that volatility products are not covered by 13F reporting. So the listed product would only be known to the brokers and the depository trust companies.

"The Powers: The Fed, Illuminati, Elders of Zion, the Rothschilds and, of course, Dr. Evil."
Wow, unusual to see blame attributed without including the Hedge Fund community, Bilderbergs, Putin, Temasek and the GIC.

 

[Martinghoul]

Somewhere out there might be a relative value trade that will make you long tails while controlling the bleed. I am still looking

Same here... I always look for these. Part of the problem is that, if you get too clever, you can never know with certainty if your concoction is actually long vol in a blowup scenario or it blows you up instead.

 

[tomorton]

The Powers: The Fed, Illuminati, Elders of Zion, the Rothschilds and, of course, Dr. Evil.

You forgot Auric Goldfinger and Ernst Blofeld.

 

[sellindexvol66]

Cole is perpetually long vol in the front of the curve and short vol at the back from what his literature seems to suggest. I can't imagine his fund has been performing that well in 2017 with the unexpected ultra-low volatility.

that's precisely what i've done this particular year through vx future combo's. long vol front or second, short vol from middle to back..even in low index vix its been a great living..but u do have to be very active in the curve.

i would not suggest that his fund under performed this year doing similar.

 

[Visaria]

I wanna short vix till it goes to zero

 

[sle]

that's precisely what i've done this particular year through vx future combo's. long vol front or second, short vol from middle to back..even in low index vix its been a great living..but u do have to be very active in the curve.

I would imagine that the key difference is your actual cumulative volatility position. What do you think your net root time vega was in any of those spreads? My sense is that anyone who was long index vol this year, either outright or via any smart spreads did not fare well.

 

[Gambit]

that's precisely what i've done this particular year through vx future combo's. long vol front or second, short vol from middle to back..even in low index vix its been a great living..but u do have to be very active in the curve.

i would not suggest that his fund under performed this year doing similar.

This is probably a dumb/ignorant question but I'll ask anyway...have you looked at doing this trade with VXX instead? It seems there wouldn't be as much risk since all the months trade the same underlying.