If you were to visit my house and open up your briefcase and pull out a brochure that described the returns I could receive from simply betting against volatility, I’d probably dismiss you as a tin man, a two bit pirate and boiler room salesman.
Over the past 5 years, XIV (inverse VIX ETF) has outperformed by SPY by more than 6x — netting +683%. That’s real money. Had you taken this trade 5 years ago, you were likely in a forlorn position, beholden to the daily news flow out of Europe, hoping the Greek government would capitulate and bend the knee to Germany.
The ironic part about betting against volatility is that the trade worked wonders during a time of heightened political instability. We’ve gone through wars, ISIS, banking scares, China scares, Trump/BREXIT/Le Pen scares, and yet here we are with a 9 handle on the VIX.
I must admit, there is an ardent specter of futility when facing the realization of the obvious outperformance of the XIV. It is humbling. Over the past 5 years, I could’ve cast aside all financial models and simply bought XIV, especially on dips, doing away with my absurd swashbuckling journeys throughout the cavernous treacheries of the market.
Then again, it isn’t much fun to make money without a little adventure.
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Guess what, The 9s vix aren’t makin me go crazy, It’s not working (addressed to Tptb manipulators)
Just remember, if VIX futures double over night, XIV will cease to exist.
Sleep well.
VIX, one of the easiest indices manipulatable by the usual suspects….FED, PPT, ESF,.. and lulling gamblers and alarmists to sleep….the water is warm, come on in.
To the overseers, Trying to outlast bears:
you.cant.get.under.11.vix.much.longer.NOW
“John Henry” swung his hammer 1 more time than the machine.
Overseers of the vix game, I can wait
This latest squeeze is truly one for the ages – lowest VIX, lowest VX1 w/ 15 days till expiration, longest $VXX losing streak (think). As sure many have noticed – the VIX touched 8’s today.
Yeah but it’s more than a squeeze. I wish more could see it. You have the middle finger using stocks after brexit, as a possible template. You have the US middle finger version following Nov 8, as confirmation. You have #45 and a stock market moved massively in very contrived and computer generated ways since nov 9, with the old power structure controlling the programming-infrastructure backdrop.
Just think… All the context and scenario under the last several months is just coincidence? …Just a squeeze… ?
We aren’t at record low VIX. Close but not quite. We are only at record low VIX if you ignore the many changes that have happened over the years. VIX futures suppress vol. Weekly options suppress vol. Calculating VIX off weeklys definitely suppresses vol. If these products and methods had always existed, we would have had many 8 prints over the years.
“The machines read the FOMC Statement, saw nothing scary and insta-dumped protection… crashing VIX to a new all-time record low of 8.84…”
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/07/26/20170726_EOD3_0.jpg
Yes, but if S&P weeklies and VIX futures were around in 93 the record would be much lower.
It’s crazy, isn’t it? I bought some
$XIV back in January 2016 for around $18. I thought I was shitting in tall cotton when I sold it for $24 in February 2016…..
feds unwinding is a game changer
fed will like a stable market but while fed sells market isn’t going anywhere up
Should be good for banks, oil, and steel.
Time to bet for a spike in volatilititties
What’s lost in all of this is the risk/reward has come down quite dramatically in VIX products. They gap way harder than they used to. Shorting vol after an event is a lot harder than it used to be. 1/3 of the post French election move in XIV happened over night. You would have captured more of the move if you just leveraged $SPY.
Well said Tonka. And more concisely than me as usual. I’ve learned a lot from your posts on here.
VMIN is a great instrument to trade options on. If you want to play the VIX weekly futures contango and contract roll yield vs. the monthly. Both short and long. Covered call selling in this at elevated levels is just as fun as buying low deltas into VIX breakouts. Just remember to buy to cover before it eats your ass. Comey’s resignation day gave me a very nice entry there. Unfortunately I sold out last week and the week before. October 28 and 30 strikes. Still holding some mid delta (low delta entry) 2 year leaps on SVXY. But I wasn’t one of the guys who really cleaned up on this. I made money but didn’t get rich. Am now shutting down the trade slowly week by week. Only 2 contracts left.
As the fed and other central banks unwind their unhedged bond book, demand for financial derivatives should surge as the private firms who buy these bonds will buy hedges. VIX futures roll yield and contango will change and this trade will get a chance to cool off a bit. Will be back in this when we see substantial backwardation. I’m more interested in sustained VIX breakouts vs. statistically significant intraday breakouts. 8 handle to 16 handle is a double. But 16 isn’t a statistically significant vix level. I think we need 8 to 20 or higher over a few days or weeks to flush these vehicles out and get a better entry. Don’t know what it’ll take to get that. Until then trade equity options and stock with OA or buy Fly’s quant trades. Much safer either way. The VIX money machine needs a reboot.
“Over the past 5 years, I could’ve cast aside all financial models and simply bought XIV, especially on dips, doing away with my absurd swashbuckling journeys throughout the cavernous treacheries of the market.”
Yeah, but you didn’t. Sorry. No guts, no glory. But I don’t think anyone did either—at least being able to hold for the full duration to “earn” that 6X return. If they did, they were either lucky, didn’t look at the market at all, or were in a coma.
noone fund bank or retail took that trade .. dont waste yourtime argumenting 6 lines for it..
Ordinary Kansans figured out that gold colored substance that Gov Brownback was trickling down on them wasn’t prosperity.
Off he goes to make the world say “Merry Christmas”, godammit!
https://www.nytimes.com/2017/07/26/us/politics/sam-brownback-kansas-ambassador-international-religious-freedom.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news
Zero is the top story on zerohedge. Nice work