Jump to content
romans holiday

Trading Volatility, Ballasted by Gold

Recommended Posts

Hiya RH, did you get involved in the VXX etf? I think i'm going to buy in....

VXX is now at 23.85 [Vix 17.58]. Down from 27 and 20 when I first got interested in VXX.

 

A while back I targeted VXX 20 or Vix 15... which are not too far off. But I'm also wary of trying to get the exact bottom. My plan is to buy in 2 or 3 lots and may buy the first lot in a week or so. I aim to also make it a sizable trade.

 

 

viiiix.png

Share this post


Link to post
Share on other sites

Double post.

 

I may add some more HK paper gold today

 

...if I can catch a bit of a price dip

 

Current

Buy (HKD/Mace) Sell (HKD/Mace)

1,020 1,022

 

Yesterday was a bit cheaper at 1,015 sell price

I bought a few ounces at GM yesterday. I don't mind so much "averaging in" over the course of the year as am about to put a hedge/ position trade in place should we get the big dip at some time. I'll use VXX for this. I'm not too concerned if VXX doesn't explode to the upside as it is dollar denominated. My native currency is the NZ dollar which I expect to depreciate against the dollar.

 

VXX is now 21.93 [down from 27 when I first got interested]

VIX is now amazingly 16.87

 

A while back I targeted either 20 on VXX, or 15 on VIX.... I guess I'll be pulling the trigger shortly.

Share this post


Link to post
Share on other sites

http://vixandmore.blogspot.com/2009/10/why...erm-or-long.htm

 

RH - you have probably seen this article on VXX and its record of tracking VIX including the problem of contango similar to on commodity etn's. I intend to do more research on this as I am attracted to the hedging potential of a VIX tracker. Given the relatively low volatility we are currently experiencing this does feel like a good time to buy in.

 

Lev

Share this post


Link to post
Share on other sites
http://vixandmore.blogspot.com/2009/10/why...erm-or-long.htm

 

RH - you have probably seen this article on VXX and its record of tracking VIX including the problem of contango similar to on commodity etn's. I intend to do more research on this as I am attracted to the hedging potential of a VIX tracker. Given the relatively low volatility we are currently experiencing this does feel like a good time to buy in.

 

Lev

Cheers. Yes, I looked into that a page or two back and came to the conclusion it is more a concern for short term traders. I'm looking for a more medium term "position trade" with the VXX where I'd be happy to sit on it for quite some time as a hedge in case the markets crash again. Ideally, I'd like to buy it near the bottom... and would not be too concerned if it went a little lower after buying. Have to admit I'm getting tempted with Vix down to 16 and VXX nearing 20.

 

What I like about the VXX instrument is it would spike if markets crashed. Gold would no doubt be caught up a little with the wider market so on a crash, so you may end up being able to buy 4 times the amount of gold you'd be able to if just sitting on dollars. This will be my big speculative punt and wouldn't really consider it if I didn't already have a large position in gold.

Share this post


Link to post
Share on other sites

OK RH -It seems you have a similar interest to me as a medium term position to hedge/short the market through which volatility allows a good chance at exiting with a profit from at suitable moments. I currently use a USD:GBP currency position for a similar purpose - but without the advantage of added volatility that VXX seems to offer.

 

I'm still looking at VIX over time with a view to deciding what a safe entry point is - looking back at history over the last 20 years - there seem to have been multiple points to exit VIX at around 20 in a bona fide bull market - whereas in a bear market opportunities to exit between 40-50 are not uncommon. I think an entry between VIX 12-15 is pretty low risk - particularly if the gap between VIX and VXX reduces further in the interim which articles seem to imply. VIX at 17.40 today - I'm watching this further for a bit while I look at patterns over the seasons - something tells me VIX is most likely to spike in the autumn so a summer purchase of VXX may be better. I'm also hoping to exit the USD:GBP position around UK election time - hopefully we will see that nearer 1.40 then so VXX could well replace USD as a hedge.

Share this post


Link to post
Share on other sites
OK RH -It seems you have a similar interest to me as a medium term position to hedge/short the market through which volatility allows a good chance at exiting with a profit from at suitable moments. I currently use a USD:GBP currency position for a similar purpose - but without the advantage of added volatility that VXX seems to offer.

 

I'm still looking at VIX over time with a view to deciding what a safe entry point is - looking back at history over the last 20 years - there seem to have been multiple points to exit VIX at around 20 in a bona fide bull market - whereas in a bear market opportunities to exit between 40-50 are not uncommon. I think an entry between VIX 12-15 is pretty low risk - particularly if the gap between VIX and VXX reduces further in the interim which articles seem to imply. VIX at 17.40 today - I'm watching this further for a bit while I look at patterns over the seasons - something tells me VIX is most likely to spike in the autumn so a summer purchase of VXX may be better. I'm also hoping to exit the USD:GBP position around UK election time - hopefully we will see that nearer 1.40 then so VXX could well replace USD as a hedge.

 

Thanks for the thoughts L. You could be right where there is no rush to buy the VXX. I like the sound of buying VXX sometime in the summer. I plan to scale in with 2 or 3 lots.... as am wary of trying to pick an exact bottom. For now am happy to sit on dollar reserves.

Share this post


Link to post
Share on other sites

All that's shiny is not gold, and exited my silver trade at 17.90. I find it an easy trade to make - psychologically speaking - as am also bullish on the dollar, for the next couple of years anyway. And silver I think will remain super volatile against the dollar. Also making this trade easier, is that I can consider it a hedge [dollar proxy] against my rather large buy and hold approach to gold.

 

If I get this speculative trade wrong and silver does break out to the next level, the chances are that it will still remain volatile and likely dip at some point to where I exited, thus enabling me to get back on board. I think this is quite unlikely though, and think silver will remain in the range seen this year. Being both a gold and dollar bull gives you quite a different perspective on silver. ... though I'm also long term bullish silver.

 

Though the profit on trading unleveraged silver/dollar may not be huge, it is still significant when you consider it doesn't involve buying a risky asset or losing your "liquidity preference".

 

Yet to buy VXX, but am now thinking of buying with less at a later and lower price if it comes.

 

sillong.gif

Share this post


Link to post
Share on other sites

RH

 

I see VIX down to 17.02 overnight and VXX to 20.22. The gap between the two indexes seems to be closing and VIX is getting closer to an entry point methinks. Would prefer VIX at 15 or below first as a hedge - as an outright investment in falling markets and increased volatility maybe it needs to fall a bit further still. But it is getting closer to a buy with limited downside IMHO.

 

Lev

Share this post


Link to post
Share on other sites
RH

 

I see VIX down to 17.02 overnight and VXX to 20.22. The gap between the two indexes seems to be closing and VIX is getting closer to an entry point methinks. Would prefer VIX at 15 or below first as a hedge - as an outright investment in falling markets and increased volatility maybe it needs to fall a bit further still. But it is getting closer to a buy with limited downside IMHO.

 

Lev

Yes, basically on the same page as you in regards to VXX. I first got interested in it at 27, and now it is nearly below 20. Back then I said I'd wait 'til it got below 20 [or VIX at 15].... so still waiting. :lol:

 

What I might do is buy in 2 stages... something like VXX below 20 and then VIX below 15.

 

Share this post


Link to post
Share on other sites

http://www.bloomberg.com/apps/cbuilder?ticker1=VIX:IND

 

Useful chart on VIX over five years. It doesn't ever seem to drop below 10 even in the most benign markets.

 

Building a stake is probably the way to do it. I favour taking the majority of the holding with VIX between 12 and 14 - as VXX still seems to be reducing at a faster rate than VIX so any initial losses will be magnified by buying with a gap between VIX and VXX - but starting as a hedge against long other positions then stake building makes sense to me.

 

Lev

Share this post


Link to post
Share on other sites
Did anyone actually buy VXX at below 20?

Wanderer did. I held of.... and bought more gold instead. :lol:

 

I decided to stick with dollar/ silver for my speculative punt.

 

I notice both Vix and VXX are coming back in with Europe having gone "nuclear". I don't think this is the big one... and will consider buying VXX if markets settle and it comes back down well below 20. VXX has shown it performs well in extremis.

Share this post


Link to post
Share on other sites

Hey RH - as you often mention wishing to hedge your assets rather than investing I wondered if you had seen / might be interested in a weekly podcast by a couple of UK hedge fund guys. If nothing else its relatively short, available on itunes and is more positive in general than others :rolleyes:

 

http://loznbelly.blogspot.com/

Share this post


Link to post
Share on other sites
Did anyone actually buy VXX at below 20?

 

I bought it on a spreadbet with cityindex. I put that money at risk as i was convinced VIX would jump at some point.

When i bought it i didnt realise it was a future and very iliquid. Couldn't see a graph of it or anything. I asked them how the price was derived and they told me they're just an execution only broker. Great.

 

VIX would go up on a day and this would go down. Kept happening. Vix up and down but this future down! Horrible not having goos knowledge of your position.

I was really uneasy about it. I'd lost half my money and then on Thursday it jumped up (obviously), although not as much as VIX. I got out straight away having made some money, but saw it as a lucky escape from an instrument i got into rashly.

 

Going forward i might just buy VXX if Vix gets under 20 again. Then again CMC markets do a VIX spreadbet. But i'd need to know a bit more about it.

 

 

Share this post


Link to post
Share on other sites

I bought VXX 3 weeks ago or so - below 20. Didn't get out at the peak last week, but am still well up. It did spike mightily at one point - could have been 30% up in a week. I'm tempted to add to the position if it creeps below 20 as it was just a 'toe in the water' to begin with. Bought VXX itself, not a future. I did it through selftrade but it is a bit of a fuss as you have to go through the broker and can't trade online.

Share this post


Link to post
Share on other sites
Hey RH - as you often mention wishing to hedge your assets rather than investing I wondered if you had seen / might be interested in a weekly podcast by a couple of UK hedge fund guys. If nothing else its relatively short, available on itunes and is more positive in general than others :rolleyes:

 

http://loznbelly.blogspot.com/

Cheers. interesting bit of banter.

 

As far as hedging goes, I'm keeping it real simple these days. Keeping a holding of dollars... and then will trade the volatility between dollar/ silver. The idea being of course to accumulate dollars... as this is a hedge against a large core gold position.

 

I expected silver to come down but it has taken off here thanks largely to ECB going nuclear. Its doesn't really concern me as I'm not wanting to accumulate silver but trade its volatility. If it breaks out to a new level, I'll buy at on its next dip, and look for a modest dollar gain before jumping out again.

 

I'll consider buying VXX if markets settle and it comes back down to 15 odd.

Share this post


Link to post
Share on other sites

silvvv.gif

 

 

 

Volatile silver has come off quite a bit. I'm targeting $15 in a month or so [this time will try to stick to my target]. This trade will be quite a large one, where I'll be piling in with something like 20% of my worth. I know I know, one should never put more than 5% on a single trade etc... but I think a bending of the rules may be required here. I basically look at it as a currency swap [buying weakness/ selling strength]. And where the risk is minimal given they are both good currencies to own.... and happily, for the trader, a contrary pair. I'm reminded of Livermore's advice, that when you find the right trade [for you] then you need to make sure you put a large enough position on.... otherwise you could be very right while only having a small profit to show for it.

 

My large dollar holding is a hedge for an equally large gold position. When silver shows weakness, I'll pile in. The idea is to trade silver conservatively, getting out again after a 15/ 20% profit in dollars [there is always the possibilty of an even greater profit if silver crashes first before buying]. Given a large core holding in gold, it will be relatively easy to sell silver as it strengthens and shows a profit. This trade also helps to just sit on gold rather than trying to trade it.

 

Edit

Share this post


Link to post
Share on other sites

Besides buying silver at the bottom, I'll keep an eye on silver wheaton and silver corp. Since they bottomed out in 2008, they made something like 300% moves to the upside over the year. They long trend for them looks down again, and look to be a good buy at the end of the year.

 

The ideal trade for super volatility/ deleveraging would be to buy something like VXX [if it comes back a bit] then sell it on the spike, then buying something like silver wheaton on the dip.

 

VXX spikes 200%, buy silver wheaton after its decline, it then recovers 200%, sell. In theory, a 900% profit. But more speculative, so will only put a 5% trade on this if I get the chance.

Share this post


Link to post
Share on other sites

I doubt whether this round of deleveraging lite will morph into the "big one". VIX and VXX coming back down, commodity currencies recovering... investors still haven't had the appetite for risk hammered out of them.

 

I reckon the big one could well come at the end of the summer. That gives a good few months while markets move sidewayish to position yourself. My plan is to buy VXX at 20 [more confident to buy it now I've seen how it performs], sit on it, when/ if deleveraging comes sell strengthened VXX which I think will at least treble, and then pile the lot into silver wheaton which should be absolutely hammered. After the crash of 2008 silver wheaton recovered well with the price quadrupling from the bottom to the top.

Sell Wheaton here for gold

 

Check out the long term logarithmic chart of silver wheaton on stockcharts. The recent action [and RSI] in Wheaton is remarkably similiar to where the stock was, and what it was doing a few months before 2008 crash.

 

It might take deleveraging proper to take silver down to a level where I'd be comfortable buying.

Share this post


Link to post
Share on other sites
I doubt whether this round of deleveraging lite will morph into the "big one". VIX and VXX coming back down, commodity currencies recovering... investors still haven't had the appetite for risk hammered out of them.

 

I reckon the big one could well come at the end of the summer.

...

I'm with you on that.

 

I reckon we might see one or two little dips and then rally for 2 months hitting 6,000 on the FTSE100....

 

.... then we get the big one

Share this post


Link to post
Share on other sites
I doubt whether this round of deleveraging lite will morph into the "big one". VIX and VXX coming back down, commodity currencies recovering... investors still haven't had the appetite for risk hammered out of them.

 

I reckon the big one could well come at the end of the summer. That gives a good few months while markets move sidewayish to position yourself. My plan is to buy VXX at 20 [more confident to buy it now I've seen how it performs], sit on it, when/ if deleveraging comes sell strengthened VXX which I think will at least treble, and then pile the lot into silver wheaton which should be absolutely hammered. After the crash of 2008 silver wheaton recovered well with the price quadrupling from the bottom to the top.

Sell Wheaton here for gold

 

Check out the long term logarithmic chart of silver wheaton on stockcharts. The recent action [and RSI] in Wheaton is remarkably similiar to where the stock was, and what it was doing a few months before 2008 crash.

 

It might take deleveraging proper to take silver down to a level where I'd be comfortable buying.

 

RH, I'm liking that strategy and it sounds a bit like my own evolving thinking! I'm pretty confident that is a good strategy if you aren't doing it on margin. I've also got some USD2 for the time being to give me coverage as sterling slides. I'm keeping aside a gradually increasing store of sovereigns too. VIX down 7% again today.

Share this post


Link to post
Share on other sites
I'm with you on that.

 

I reckon we might see one or two little dips and then rally for 2 months hitting 6,000 on the FTSE100....

 

.... then we get the big one

Yep, I'm keeping it simple and looking to put on one big trade should we get "the big one". Looking at the disturbance in VXX, you first see a small tremor earlier, then this one was a little more more violent... if it increases exponentially... perhaps VXX to 80 next time and the double dip.

Share this post


Link to post
Share on other sites
RH, I'm liking that strategy and it sounds a bit like my own evolving thinking! I'm pretty confident that is a good strategy if you aren't doing it on margin. I've also got some USD2 for the time being to give me coverage as sterling slides. I'm keeping aside a gradually increasing store of sovereigns too. VIX down 7% again today.

Yes, definitely unleveraged. It will be interesting to see how long it takes for VXX to come back down....now 28. Also, I wonder if the price might be supported a little above 20 as I imagine a few bears will be lining up to buy......

 

Even if it stays low [or weakens a little] for some time after buying, I'm not too concerned as being dollar denominated I still have a dollar asset to off-set a rather large holding in gold. The risk/ reward ratio for this one looks pretty good to me.

Share this post


Link to post
Share on other sites

dolllla.gif

 

Dollar continuing to strengthen. Looks like it's just getting warmed up.

 

Silver now in decline [17.28]. Will look at swapping dollar for silver around 15. It may even go lower if markets go on a deleveraging binge. Watch out below.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×