VXX a good buy at current levels?

Quote from sle:

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.
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This response is more to the point.

You make an assumption that I'm net long stocks...
And hedging that with short Vol.

No, I'm very diversified market neutral stocks...
And hedging that with short Vol...
Plus I'm scalping Vol all day long...
Though not so much the last 10 days near all-time lows.

I've traded through 6-7 "market crashes"...
The first one being the Russian default in 1998.

My Portfolio has held up in each "crash" since 1998...
And then you enter a period of panic and wider spreads...
I throw off money for weeks or months after a "crash".

So I take a 3% hit on the short Vol and get out...
Then start grinding 1%/week until the market panic subsides.

By shorting Vol in the form of VXX hedges...
I'm gaining a stream of income is dead markets...
In return for maybe a 3% hit in a spike like August 2011...
With the spike followed by windfall market making profits.

I'm actually hoping for Apocalypse in spite of being short Vol.
 
hey deedee, not assuming...simply curious...market neutral stock in of themselves cannot be what earns you in tail events? are you saying you have no net long vol during panics..? i would never talk my edges here but i do find it hard to see what can produce outsized gains in russian default type events other than long vol. could it be you are buying the lows of banged up equites?
 
Quote from DeeDeeTwo:


By shorting Vol in the form of VXX hedges...
I'm gaining a stream of income is dead markets...
In return for maybe a 3% hit in a spike like August 2011...
With the spike followed by windfall market making profits.

I'm actually hoping for Apocalypse in spite of being short Vol.
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OK, are you short VXX at this 11 handle (11.85 last)?
 
Quote from DeeDeeTwo:
You make an assumption that I'm net long stocks...
And hedging that with short Vol.
More...
I am making an assumption that you are a liquidity provider, no assumption on your beta position. In essence, you are a behaving as if you are long gamma (scalping the noise) but are short convexity at the same time. So it would be surprising for me if you, for example, made money in the week of 09/11 or during the gap-week of last August. As I said, however, if you not going to get stopped out, there is nothing wrong with it.

PS. I am not a stat arb specialist so I might be blowing smoke out of my arse (my specialty is vol and I do small snippets of stat arb that are an easy compliment to my book).
 
vxx is the best vix etf, but why trade it? Those etfs are inaccurate and have suprises. Even vxx does not have that much volume, compared to futures. I know etf arb is profitable, but are futures not good enough -plenty of volume in futures to scale up.

Where am I wrong with this?
 
Quote from DeeDeeTwo:



I throw off money for weeks or months after a "crash".

I'm actually hoping for Apocalypse in spite of being short Vol.
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Ok .. what does it mean to "throw off money" after a crash.. . make sense of that for me please....

is the idea if your shorting the futures term structure.. your long the front month.. or even the vxx or vixy.. then your short the farther out ... vxx gives you a static position in the front month.. enabling you not to have to trade in and out of the front month.. and as well when there is some crash the backwardation goes in your favor with the vxx product banging way up over your short back month..

even though revealing your edge might not be a great thing.. you do realize that everyone these days just like in days past with all the proper information lose money... you could put money in front of some people and they would burn it and wonder how it happen
 
statarb should be generally defined. i define it as where you have statistical edge (say a good rsq). it does not have to come from pairs / spreads convergence.

when vol is high and mkt become highly correlated (risk on/risk off mode), it is usually easier for directional short term scalping. also some very tight pairs become tradable since spreads widen.

not sure whether this is what DeeDeeTwo was referring to.

just my 2c.
 
Quote from sle:

I am not a stat arb specialist so I might be blowing smoke out of my arse (my specialty is vol and I do small snippets of stat arb that are an easy compliment to my book).
More...

I'm the opposite...
A veteran stats arb specialist...
Which pretty much defines all Market Makers today...
And view limited Vol hedging as a good complement to a market neutral Portfolio....
And, yes, I stayed market neutral 2007-9 and summer 2011.

Let's say you have a 90% correlated pair hedge...
You will MAY stay reasonably well hedged in a volatility spike...
Depending on the quality of your pair.

Now this morning...
I have 60 90% correlated pair hedges...
Which means I have HIGHLY correlated long/short BASKETS...
And don't think common stock with $0.01 spreads...
Think bonds or high-dividend stocks like REITS or utilities.

You can assume any Vol position on top....
Would be just as well thought out and back-tested...
Say SHORT short-term Vol paired with LONG medium-term Vol...
And that protected by bull call spreads.
 
Yesterday the VIX closed at its lowest in the past three years. Some possible trades are VXX and TVIX.

TVIX has a current price of 2.65 with a Intrisnsic value of 2.351.
VXX has a current price of 11.65 and an intrinsic value of 11.524
 
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