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  • yourbestfriendintheworld yourbestfriendintheworld Jan 21, 2013 1:27 PM Flag

    vix scams of scams

    Somehow never saw your post, or i'd have replied.

    Bernanke couldn't care less about the VIX. He's got inflation and unemployment front and center on his plate. Dealing with portmanteau metrics derived from derivatives based on another portmanteau index measuring an arbitrarily-weighted subset of equity prices is the last thing worrying him.

    And he certainly won't go beyond that to care about the manually adjusted funds purporting to mimic the fun-house mirror, either.

    So maybe it's your theory of causality that's off. The Fed and the VIX aren't correlated at all.

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    • ok , i believe you ;).
      so who is keeping the pocket change from the shorts getting their face ripped off ?

      a story on uvxy...when i was purchasing the trash,, one bank said....we CANNOT sell you that product,, the other said it was a great timing , that position is down 96%,...lol i even find it funny at this stage..

      • 2 Replies to arwen_imaginary
      • Haha! The Fed and the vix arent correlated at all- is it April fools day already!?

        Check these links:
        bit(dot)ly/TZiCQQ
        bit(dot)ly/VuANN6

        Crushing the VIX has been one of the, if not THE, principal instruments of the Fed in engineering this rally.

        Recall 2011 when the Vix was shooting up and was the most watched indicator anywhere in the financial world. Everybody thought of it as the canary in the coal mine. It looked as is the world might collapse and the Vix was the barometer of that. So it became hugely important for a while and a strong vix hampered confidence in the markets (which means deflation- not good for Benny). Remeber MF Global and BAC at $5?

        But this also meant that the HFT algos, who make up the vast majority of trades, were all programmed to interpret the falling VIX (and vxx) as a "crisis over" signal which meant risk-on for algos then rammed up indexes by buying anything that wasnt nailed down.

        The good people at 33 Liberty (the real boss of things, the NY Fed) then simply kept their fat pipe open to the good people at Citadel to provide them with all the liquidity in the world, solely for the purpose of pumping the market by shorting the VIX and it works nearly flawlessly. Something like this:

        Equities open and dip for the first 10-30 mins (unless futures were already ramrodded overnight) so those in the know can BTFD ----- The vix rises just a bit on open, but then the algos immediately start hammering the front month vix futures down (small market so easy to do with lots of liquidity) ----- this causes vxx to anticipate contango and it immediatly starts to fall ------ all other algos take this as a signal that fear is evaporating (as they have been programmed to frontrun a falling vxx by buying stawks) and bid up high beta and momo stuff (look at CMG for the first few months of 2012- lol!) ----- as these names rise, the general markets are rising and indexes are up day after day ------ this gives players the confidence that finally (only took 3 years and 15 trillion) the central banks have successfully rigged the markets to the point they will never go down again ----- this gives remaining humans in the market the confidence to go even longer which crushes VIX even further.

        Cycle is repeated.

        Take my advice: I made the same mistake as you, I quadrupled my money in 2011 on the tvix trade, it literally made 2011 one of my best years. AND I was smart/lucky enough to get out at $89. BUT I lost all those gains and then some in early 2012 in trying to catch a falling knife to pick a top in a ridiculously fake and manipulated market. We lost over 2 mil in our fund (about 2% of AUM) shorting the market and going long different VIX products in early 2012. But finally understanding the game we went heavily long the XIV (vxx short) at $11 in April and doubled down at $9 in May, and have held ever since. This 100%+ return really saved our #$%$ in 2012.

        Moral of the story: yes, the Fed is rigging the markets (same reason to be in AGNC) and trust me when I say Potter will never let the VXX go up again. So get into the XIV now (its never too late to correct a mistake in investing) wait patiently for the natural decay in VXX due to contago to take its course, and before too long (maybe a VXX split or 2) and you will have made your money back.

        Good luck!

      • By the way, UBS in Switzerland cut off orders for the UVXY a little under a year ago but is still happy to execute TVIX trades... go figure...

        No wonder blackRock just announced it was buying Credit suisse's ETF business (incl. Tvix)

 
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