VXX a good buy at current levels?

[sle]

Quote from DeeDeeTwo:You didn't understand my post...
Fifty cent terms and $3.50 will buy you a coffee at Starfcuks.

I am saying exactly what I am saying. You are not the first and not the last one to think that stat arb and short vol are well paired. However, the fact that your strategies are positively correlated with VIX does not make them long convexity that you are already short. Should there be a protracted period of highly correlated movement (also known as a market crash), you will lose money on both short vol position and on your stat arb strategies. Just saying that being a provider of liquidity and being short convexity does not go as well together as you make it sound.

This said, if you are not really tied to draw down levels (e.g. you are trading your own money and not gonna get hit by redemptions after a 10% hit), it's not a bad strategy

 

[cdcaveman]

Quote from DeeDeeTwo:


And scalping profits go up dramatically with Vol spikes (by 200-400%)...
Because spreads widen and you exploit the panic.

So my core business and the VIX have a strong positive correlation...
Which means that short Vol is an excellent hedge...
Especially since Vol is almost always overpriced...
You add profits in quiet markets and can absorb the Vol hit on spikes.

by scalping you mean your long vol dynamic hedging .. and by short vol excellent hedge and quiet markets absorb vol spike hits.. you mean so far so good... adding profits from quiet markets to absorb vol spike hits makes sense untill it doesn't.. I don't think anyone could say that vol is almost always overpriced.. in what when for how long.. why just cause it has been.. it makes sense untill it doesn't.. History is just that History.. and Volaility can never be priced perfectly.. bleed an earn huge or sell premium collect small and blow up big.. its all possible

so are you saying your gamma scapling with a long vol option position and uncorrolating that with a short vol term structure vix trade?

 

[colonial dr]

Quote from mramaswamy1:

How low can VXX go? Markets have to have some volatility. In spite of the contango effect, VXX cannot go to 0, can it? I am selling naked weekly SPY puts every week. I was thinking of buying VXX shares as a hedge against a market crash.

why would you play around with vxx etf if you are not making markets or doing spread trading?

 

[cdcaveman]

Quote from colonial dr:

why would you play around with vxx etf if you are not making markets or doing spread trading?

because people if they actually calculated the cost of carry on a vxx trade might actually be attracted to the hedge it can create... hey it might be ambigiuos and have a huge tracking error and a big cost of carry.. but in some cases i'm sure it makes sense.. plus when it does start rising the backwardation works for it in a very temporary sense.. theres a cost to buying puts on every security you have in your portfolio over time as well.. i'm not defending actually i'm just theorizing.. this is all just a theory of mine..

 

[atticus]

Nobody sells VXX at 12 unless they assume that Barc will stop issuing. Long VXX, short futures.

 

[cdcaveman]

Quote from atticus:

Nobody sells VXX at 12 unless they assume that Barc will stop issuing. Long VXX, short futures.

i get the first part.. but not the second.. as usual for Atty..
what about Long VXX and short futures?

 

[atticus]

Quote from cdcaveman:

i get the first part.. but not the second.. as usual for Atty..
what about Long VXX and short futures?

VXX is broken, but the trade is long VXX, short Sep futures at 726.

 

[cdcaveman]

ya thats a way to play the vxx against itself.. but then your betting on continued corrolation which from what i hear is pretty consistant. i'm long the Vixy... not much different but i'm not short anything .. it hurts a little right now .. but i'm not sweating it.. vol of vol is high enough to make sense of a short term vixy trade..

 

[atticus]

Quote from cdcaveman:

ya thats a way to play the vxx against itself.. but then your betting on continued corrolation which from what i hear is pretty consistant. i'm long the Vixy... not much different but i'm not short anything .. it hurts a little right now .. but i'm not sweating it.. vol of vol is high enough to make sense of a short term vixy trade..

Long Aug and Sep at $26? That's a strong headwind.

 

[cdcaveman]

your right i feel it in my gut to... not sure if im anchoring or if covered calls till vol goes up makes any sense or just a flat exit at a lossmis the best.. im actually long at 32. i sold 34 striked puts for 2.20 Recieved the shares and then realized after research how much more the roll cost was gonna cost me.. the change in my assumptions has confused me as to what to do....