Trading Volatility, Ballasted by Gold

[drbubb]

From DrB's Diary

I find it bizarre that stocks are testing recent lows with VXX (& VIX) at such low levels

 

Chart: VXX vs. SPX

 

Any comment?

[romans holiday]

From DrB's Diary

I find it bizarre that stocks are testing recent lows with VXX (& VIX) at such low levels

 

Chart: VXX vs. SPX

 

Any comment?

 

Perhaps VXX/ VIX won't do much unless there is either a sharp reversal or sudden and volatile strengthening of a trend. If the EM don't drop sharply here, and instead meanders sideways, or even rallies a little, VIX/ VXX could go lower. Maybe VIX/ VXX will only really jump when EM breaks sharply to the downside.

 

I'm still targeting a better price for VXX. If I miss it not too concerned as am still sitting in a large cash postion with which to buy some stock on the downside. I kind of see VXX as a leverage on cash, where I'd look to swap for a stock on the VXX spike/ EM dip.

[ziknik]

http://ftalphaville.ft.com/blog/2010/09/03...vix-curve-ball/

 

While the asset class exposure is very different, VXX is very similar to UNG in several ways; both products have seen waves of cash inflows despite delivering disappointing share price performances.

 

Since its inception in January 2009, VXX has seen cash inflows of approximately $2 billion, including more than $800 million in the first quarter of 2010. But VXX’s assets at the end of the first quarter totaled just $1.2 billion, the result of a woeful share price performance over the last year and a quarter. Since its launch VXX has lost more than 80% of its value, making it the worst-performing non-leveraged and non-inverse ETF over that period.

[romans holiday]

http://ftalphaville.ft.com/blog/2010/09/03...vix-curve-ball/

 

While the asset class exposure is very different, VXX is very similar to UNG in several ways; both products have seen waves of cash inflows despite delivering disappointing share price performances.

 

Since its inception in January 2009, VXX has seen cash inflows of approximately $2 billion, including more than $800 million in the first quarter of 2010. But VXX’s assets at the end of the first quarter totaled just $1.2 billion, the result of a woeful share price performance over the last year and a quarter. Since its launch VXX has lost more than 80% of its value, making it the worst-performing non-leveraged and non-inverse ETF over that period.

Sure, the only reason you'd want to buy VXX is if you are an uber-bear and see massive volatility around the corner. The market has continued to frustrate the bears, and VXX has continued to track lower. I think the instrument proved itself pretty well when it spiked along with VIX a few months back... when it went from 18 to the mid 30s. If the market crashed to new lows [the old VIX highs] VXX should go to near 80.

 

If I bought VXX here, the market may remain stubborn and VXX could go down to 15....10. That would be tough if it was a trade you were doing, but not quite so tough if you were looking to stake a longer term position. Still tough though.

 

VXX is super speculative. I'm considering it because I am so super conservative with the other 95% of my capital.

 

 

Check out VXZ:

http://ftalphaville.ft.com/blog/2010/07/14...ing-in-october/

Curiously, there was an equal volume explosion in iPath’s mid-term ETN the VXZ (which sits further down the curve from the fourth (October) month onwards) around the same period — although with a significantly larger price gain:

[drbubb]

Sure, the only reason you'd want to buy VXX is if you are an uber-bear and see massive volatility around the corner. The market has continued to frustrate the bears, and VXX has continued to track lower. I think the instrument proved itself pretty well when it spiked along with VIX a few months back... when it went from 18 to the mid 30s. If the market crashed to new lows [the old VIX highs] VXX should go to near 80.

 

If I bought VXX here, the market may remain stubborn and VXX could go down to 15....10. That would be tough if it was a trade you were doing, but not quite so tough if you were looking to stake a longer term position. Still tough though.

 

VXX is super speculative. I'm considering it because I am so super conservative with the other 95% of my capital.

 

 

Check out VXZ:

http://ftalphaville.ft.com/blog/2010/07/14...ing-in-october/

I tend to buy in-the-money calls on VXX, which do not look terribly expensive, and carry limited risk

[romans holiday]

I tend to buy in-the-money calls on VXX, which do not look terribly expensive, and carry limited risk

That's an idea. What's the "strike price" targeted and the premium on this?

 

My eyes tend to glaze over when I look at financial instruments on financial instruments?

 

But this could be a good option for me. I think the VXX could carry on lower before spiking... say next month.

[romans holiday]

Well, finally heard back from my [NZ] broker about buying call options on VXX; "Legally we can't actually invest in listed options in the US sorry".

 

So much for that idea. I may still buy outright buy a position in VXX soon.... or then again, I may buy this instead:

 

http://www.trademe.co.nz/Business-farming-...n-313158484.htm

[ziknik]

DOUBLE POST

 

Isn't it the wrong time to buy VXX when VIX futures are already pricing in a 33% increase

http://www.businessweek.com/news/2010-09-1...call-rally.html

Sept. 13 (Bloomberg) -- Concern that stocks will plunge has never been higher in global options markets, and that may mean it’s time to buy.

 

Futures on the Chicago Board Options Exchange Volatility Index are pricing in a three-month gain of 33 percent

and contracts based on swings in Europe and emerging-market equities have risen to near records, data compiled by Bloomberg show.

 

Because of

http://www.financialsensearchive.com/fsu/e.../2009/0115.html

Many people are going to be disappointed if they fail to understand the impact of the present super contango upon future investment returns of these instruments.

 

???

[littledavesab]

http://www.trademe.co.nz/Business-farming-...n-313158484.htm[/url]

 

For someone who has avoided jumping on miners junior or otherwise that is jumping in the deep end lol. But seriously good luck my friend.

:)

[romans holiday]

DOUBLE POST

 

Isn't it the wrong time to buy VXX when VIX futures are already pricing in a 33% increase

http://www.businessweek.com/news/2010-09-1...call-rally.html

 

Because of

http://www.financialsensearchive.com/fsu/e.../2009/0115.html

 

???

From the business week article:

Bulls are counting on projections of 36 percent and 15 percent earnings growth for S&P 500 companies in 2010 and 2011, respectively, according to the average analyst forecasts in a Bloomberg survey. Sentiment on stocks is already turning around. Individuals’ confidence in U.S. equities has soared in the biggest two-week climb since March 2009, according to the American Association of Individual Investors

 

Yes, I've held of buying VXX... I no longer think you can "stake a position" in it because it has a natural entropic pattern to it. But if you could buy it at the right time [kind of defeats the purpose as timing is so difficult] and bought it just before a spike in VXX, it would no doubt perform well.

 

I'm thinking some sentiment indicator would be the best to use for this. When the sentiment is generally bullish, and VXX is scrapping the bottom....

 

Check out VXZ. It looks more stable.

[ziknik]

...

I'm thinking some sentiment indicator would be the best to use for this. When the sentiment is generally bullish, and VXX is scrapping the bottom....

 

Check out VXZ. It looks more stable.

The price of the futures are shown here http://www.cboe.com/DelayedQuote/DQBeta.aspx

 

The time to buy VXX or VXZ is when the futures curve is a little flatter.

[drbubb]

VIX is in an interesting holding pattern ... update

 

 

And it should be a good time to dust off Roman's Journal

 

[romans holiday]

VIX is in an interesting holding pattern ... update

 

And it should be a good time to dust off Roman's Journal

Yes, I'm thinking one more down-leg might do it. Then I'd think about putting a little money into it for a super-speculative trade.

 

Still happy to sit on my US dollars, which I'd pile into silver should we see a large pull-back there. This trade being a hedge against a rather large "buy and hold" gold position.

[drbubb]

The Dollar is getting whacked again overnight

 

But mostly the recent falls (in UUP) have been on light volume, which is moderately bullish.

Still the weak dollar should keep VXX and VIX from leaping

[drbubb]

Yes, I'm thinking one more down-leg might do it. Then I'd think about putting a little money into it for a super-speculative trade.

Good call ! VXX back down again ! / update

[drbubb]

We may need something earth-shaking to reverse the drift down in VIX

/see: original 3D photo

 

But I do not rule it out. Look at the position of VIX:

[romans holiday]

We may need something earth-shaking to reverse the drift down in VIX

Crikey... I just posting this a few minutes ago... ha ha:

 

Yes, it also sounds very deflationary to me!

 

Deflation, yeh, that's when prices go up innit.

Don't be fooled by appearances.

 

A schism is opening up between tectonic plates; the real economy and the financial one. The further it moves, the more the tension builds......

 

This picture is also applicable to currencies. The main characteristic of today is instability.

 

http://www.greenenergyinvestors.com/index....st&p=186858

 

We could see another spike in commodities .... and then a crash.... just like '08

[Tune2001]

Be careful though...While VXX is making new lows, VIX is yet to do so. VXX is falling faster than VIX - see:

[drbubb]

Shake down ?

[Tune2001]

Shake down ?

 

I guess VXX isn't all that great a tracker of VIX. If it was, the above graph would be fixed at 1.

[romans holiday]

VIX back below 20. Before spiking back in May, VIX was near 15.

 

This could perhaps see VXX down as far as 10 odd.

 

 

[Tune2001]

VIX back below 20. Before spiking back in May, VIX was near 15.

 

This could perhaps see VXX down as far as 10 odd.

 

Now we're below 19 and still very much pointing DOWN.

[Mabon]

What would you guys say is the best way of capitalising upon the VIX?

 

Would you just buy it when it goes south of 19 and then sell it as it rises to say 45 or so?

 

And then repeat?

 

Can you suggest another way of capitalising upon the sentiment indicator?

 

Ideas?

[romans holiday]

What would you guys say is the best way of capitalising upon the VIX?

 

Would you just buy it when it goes south of 19 and then sell it as it rises to say 45 or so?

 

And then repeat?

 

Can you suggest another way of capitalising upon the sentiment indicator?

 

Ideas?

VXX does not simply reflect VIX, it has a built in entropic pattern to it even when VIX is relatively stable [there are some earlier posts on VXX if you want to look closer at it].

 

But what VXX will do is that when VIX spikes it will spike along with it. The spike in May showed how well VXX corelated to VIX.

 

Because of the entropy in VXX, it is not good for a position trade. Timing is quite important if you were to buy it. This makes it a VERY risky buy.

 

Buying VXX is super-speculative which I may do with quite a small position. Safer to trade volatility is silver, which I'd feel more confident trading a much larger position. It is an easy buy..... even if the price slumped after you bought as it would no doubt bounce back again.... where you'd sell for dollars. I use this to hedge a rather large gold position.

[ecoface]

RH,

 

Have you traded VXN, or have any views on this and its disadvantages relative to VIX?

 

Cheers.