Author Topic: Hedging - VIX  (Read 11636 times)

Hester

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Re: Hedging - VIX
« Reply #20 on: August 05, 2011, 04:48:17 PM »
Would being long XIV the safer bet?  I always worry about the termination clause though (termination when VIX futures spike >80% in a single day)

Right, the termination clause is an unacceptable tail risk in my opinion. Plus, going short the vxx is a good way of leveraging an otherwise all long portfolio. Say you're 100% invested in cheap stocks, taking a 5% short position in VXX eats up no capital and actually adds some capital if the broker allows reinvestment. But the XIV is perfectly acceptable.


rijk

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Re: Hedging - VIX
« Reply #21 on: August 06, 2011, 03:51:31 AM »
here is some good info on VIX ETF's, key learnings:

- "But HOLY COW could being short this on a large scale murder you."
- "Being short it has been a huge winner, being short it in size would have left you bankrupt several times"

short above 35 max 10% should keep this safe......

regards,
rijk

http://caps.fool.com/Blogs/a-date-with-the-devil-peeking/597406

onyx1

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Re: Hedging - VIX
« Reply #22 on: August 06, 2011, 05:27:59 AM »
Can you guys please explain to me how the VXX termination clause works?

bobp

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Re: Hedging - VIX
« Reply #23 on: September 22, 2015, 10:04:13 AM »
This is an old thread. It was started on Jan 14,2011. On that date TVIX, Velocity Shares Daily 2x vix short term etn, was trading at about 50,000. It's now trading at about 11. VXX is down from about 600 to 25.

I started looking at these vix etf's after Lance posted he'd bought xiv, which is the inverse to vix.
I know this is an old idea, but it's new to me.

So my question - Why not short these vix etf's that obviously have a structural bias to lose value long term? The structural issue is explained in prior posts better than I could explain it so I won't try.

I know you can get hurt short term, but if the position is small enough that you can wait it out, this seems like a pretty good bet. They're down every year. And I know I'm looking at a short time span back only to2011. There's been three pages of discussion prior to this but I'm wondering if anyone has any new input. Before I get myself in trouble.




RichardGibbons

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Re: Hedging - VIX
« Reply #24 on: September 22, 2015, 12:06:12 PM »
So my question - Why not short these vix etf's that obviously have a structural bias to lose value long term? The structural issue is explained in prior posts better than I could explain it so I won't try.

I know you can get hurt short term, but if the position is small enough that you can wait it out, this seems like a pretty good bet. They're down every year. And I know I'm looking at a short time span back only to2011. There's been three pages of discussion prior to this but I'm wondering if anyone has any new input. Before I get myself in trouble.

So I think there are a few issues.  First, you actually need to be really confident in your strategy to do it.  I can't remember how much TVIX theoretically would have gone up in 2008, but it was large, like 25 or 50 times.  Second, at times like this, the contango becomes backwardization, so you'll be in the situation where you aren't only down 25 or 50 times, but you're also losing another 25% every month or so.  Finally, at those times, you have the borrow risk and the borrowing fees to worry about. The fees could be at 100% a year at that time, and the risk might be that your short shares get called back, and you can't find another borrow, so are forced to close out your short position.

So basically, you have to have balls of steel, and hope that you can maintain your borrow.  (I did something like shorting a UVXY $60 LEAP call when UVXY was under $20.  It wasn't pleasant when UVXY approached 60.  I think I lost 5 times my small, experimental bet when I closed it out in the mid-50s, though I would have made money if I had held on.)

bobp

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Re: Hedging - VIX
« Reply #25 on: September 23, 2015, 10:38:08 AM »
Thanks for the reply Richard. I didn't realize the 2008 results would be so ugly. The website sixfigureinvesting has some good information on it. I'll read up some more.

redhots

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Re: Hedging - VIX
« Reply #26 on: July 29, 2017, 11:56:30 AM »
Nice discussion on low volatility here.
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/a-2q-letter/msg305614/?topicseen#msg305614

Anyone looking at hedging at this point?

investor-man

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Re: Hedging - VIX
« Reply #27 on: July 29, 2017, 10:25:28 PM »
After reading that I'm seriously considering purchasing VIX with the extra cash I have on deck
Ferengi Rule of Acquisition #3 "Never spend more for an acquisition than you have to."

Spekulatius

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Re: Hedging - VIX
« Reply #28 on: July 07, 2020, 04:09:16 AM »
Resurrecting this, since I found this interesting interview with the inventor of the VIX. I didnít know for example that index puts tend to be overvalued systematically since institutions buying them, but individual stock options are not:
https://www.bloomberg.com/news/articles/2020-05-15/the-father-of-the-fear-gauge-says-he-feels-reassured-by-the-vix
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