Interesting that in this runup, I literally did not get one email or comment regarding the trading VIX products.
Generally what transpires is the “cash” VIX runs, but “trading” VIX positions don’t budge. And owners of VIX upside wonder wtf happened.
But none of that went on this go around. Could it be some self-selection, that is to say everyone has either figured out how this pup trades, or just gave it up? Could it be the VIX rallied so much that even though trading VIX longs underperformed, they still did so well that it owners were happy?
Probably a little of all of the above.
Just to refresh, because it can never hurt to reiterate, the VIX itself is an estimate of a normalized ATM option in SPX with 30 days until expiration. A VIX future estimates where that VIX will be on the day of expiration. In other words, buy a VIX Dec future, you are betting on where traders on December expiration will expect SPX volatility 30 days ahead from there. A VIX option is a cash-settled European exercise bet on where the VIX will be on the day of expiration.
VIX futures and options virtually always underperform on big VIX moves. And there’s no set relationship between any future and the VIX itself, any spread can (and did) happen.
Keep in mind that VIX oct futures only crossed above 50 a couple trading days ago. And further out VIX’s never got close. Dec’s for example are in the low 30’s. Which remember was high not all that long ago.
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I am in the “better things to mess around with” department on this one.
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absolutely. The only trade I’ve ever seen really “work” in these is the occasional cheap shot. But even then, you forget all the times that same guy bought worthless ones. I just stay away, better ways to play volatility.