Bloomberg radio explained it in very simple terms. While folks make money hand over fist as the market surges higher, they feel compelled to own an insurance policy to protect those fed given profits. And, as long as those folks are making money with market moving higher and higher, they simply don't mind losing a portion of those profits to the insurance policy, although the insurance policy ( VIX derivative) is a long term loser!
So, while all of these whales making millions to billions as the market goes higher and higher, the purchase of these VIX derivatives are at an all time high. So they are not going anywhere! And I will continue to short them every time they pop, because they always ultimately go down, no matter how high they pop!
Lusob09: "Can you actually post your real time trades so you can actually prove to us your making money shorting VXX?"
Lusob: Could/would you kindly leave your "post your REAL TIME TRADE" obsession behind at the TVIX board and others that you infest and please leave this board unmolested with your incessant, insufferable boasting and prattle.
With all due respect,
Bustin the stupid short seller, Contango his best friend, Backwardation stoned on catnip, and RollYield the ferret, MBA
If you were a portfolio manager who wouldnt get fired for a 7% return in a 10% return market, but might get fired for a -15% return one year, yes, you WOULD take portfolio insurance. It does make some sense in risk/reward terms for some players, even if the expected return is lower.
The vix has hit 30 sometime each year since 2007. is 2013 different? we shall see. cost of insurance isnt high right now.
Imagine you know that a company in one year will either become bankrupt or be worth 10 times what it is worth. Then, if you allocate right with options. You will take out certain areas that the market is likely heading. For example, a cancer curing company waiting on approval from the FDA. It is their only drug that they have. It will either move up big or become pennies on the dollar. Allocating puts and calls will create a straddle position that make sure that the only ways that you can make a profit is by the effect of this news. This is what companies do with options. They allocate to effectively position themselves so that the likely outcomes will be profitable and the highly unlikely outcomes are profit less. It is a game of allocation.