VXX a good buy at current levels?

Quote from cdcaveman:

Sure the vix could stay low and the futures term structure could make it seem like clear as day that shorting the futures term structure makes complete sense.. TILL IT DOESN'T.. risk is not down... lots of blow out risk shorting the term structure right now... when vol picks up.. its really going to pick up... sure it slows down like a freight train coming to a stop.. but it blows up out of no where.. my better sense tells me .. find a ratio backspread to trade in the futures... keep putting it on for a small credit... keep letting it expire.. keep my exposure long to a vol spike.. way better risk to reward..
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Look over in the Options forum, there was a long thread on the VIX. Atticus, at a time when the term structure was just as steep, suggested shorting the options on the futures, and hedging with SPY puts.
I put this on at that time and it wound up making money on both sides of the trade. Started this up again last week, shorting Sept and to a lesser extent Oct, hedged with SPY/SPX put spreads. We'll see how it works out. Will close out/modify when VXV is back to within one std of its normal relationship with the VIX, or by Labor Day, whichever comes first.
So the idea is to short that term structure but hedge it to keep the risk from a blowout to something reasonable. But going short XIV just because the level of the VIX is low, without looking at the term structure of VIX, is just amateurish.
 
Quote from trefoil:

Look over in the Options forum, there was a long thread on the VIX. Atticus, at a time when the term structure was just as steep, suggested shorting the options on the futures, and hedging with SPY puts.
I put this on at that time and it wound up making money on both sides of the trade. Started this up again last week, shorting Sept and to a lesser extent Oct, hedged with SPY/SPX put spreads. We'll see how it works out. Will close out/modify when VXV is back to within one std of its normal relationship with the VIX, or by Labor Day, whichever comes first.
So the idea is to short that term structure but hedge it to keep the risk from a blowout to something reasonable. But going short XIV just because the level of the VIX is low, without looking at the term structure of VIX, is just amateurish.
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Interesting... Amatuerish would be right.. just trade in the futures and in options..
 
imo there are too many uncertainties in VXX/XIV to go long or short

if you go long you are implicitly short barclays credit risk because if VIX really goes up a lot you know barclays will be in trouble

if you go short you run the risk that ishares will halt creation units creating a massive short squeeze like the one that happened in TVIX in february

these products are too unreliable and untested to depend on imo. look at a long-term chart of VIX going back to its inception. You will notice that since 2008 we've been in a unique risk-on/risk-off roller coaster in VIX. This will not always be the case. The regime will change. Maybe it will transition to the mid 00s when vol was in the low teens for years. Maybe it will transition to 2007/early 2008 when vol steadily climbed instead of spiking (that would have seriously crushed any VXX shorts, as the roll yield was reasonably positive but still you hemorrhaged money every month)

id rather trade delta one stuff instead of these crazy products
 
if bullish on VXX, one guru has a strat where he goes long a VXX call and then sells ATM wkly calls against it to cover the loss due to the contango roll while waiting for a move up. he uses a ratio of only selling 50% of the number of short contracts against the long contracts
 
Thats ratio backspreading... Sell the closer to the moneys buy twice as many or some ratio of otm's thats the best way to get long expouser without getting ripped down due to roll cost.. Cause you know alal things being equal roll cost is gonna be killing ya. .
 
Quote from thepolarbear:

oh of course i would LOVE to be in a position to issue these things. I'm sure the issuers make out like bandits.

If they were able I'm sure they'd issue 10x levered volatility ETNs.

aaaaand its gone!

http://www.youtube.com/watch?v=NmFo-LKHGY0&feature=related
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love that.. me and my friends use that quote alot...

this one is hilarious to... "I'll use my credit card"

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Quote from trefoil:

Look over in the Options forum, there was a long thread on the VIX. Atticus, at a time when the term structure was just as steep, suggested shorting the options on the futures, and hedging with SPY puts.
I put this on at that time and it wound up making money on both sides of the trade. Started this up again last week, shorting Sept and to a lesser extent Oct, hedged with SPY/SPX put spreads. We'll see how it works out. Will close out/modify when VXV is back to within one std of its normal relationship with the VIX, or by Labor Day, whichever comes first.
So the idea is to short that term structure but hedge it to keep the risk from a blowout to something reasonable. But going short XIV just because the level of the VIX is low, without looking at the term structure of VIX, is just amateurish.
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I guess I'll just have to be satisfied being a poor ole amateur then.

wake me up when tshtf: Till then I'm comfortable with my short of xiv.
 
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