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ProShares Ultra VIX Short-Term Futures Message Board

  • cavanyc Apr 2, 2012 6:11 PM Flag

    Do you realize you're betting against contango?

    And every pro is taking your money like candy from a baby? duh

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    • we're playing volatility and the "event'. Contango is an embedded risk premia, risk, real risk is the black swan event.

    • I disagree, the pros, a.k.a. the big boys, shorted vast amounts of shares as backwardation was ending and when the market was tanking last September/October. They closed that trade when TVIX collapsed back to NAV and when UVXY reverse split. In order to close their positions without spiking them back up, they bought to cover with the very shares that now the retail, small-timer and late arrivals were selling short once it was "safe" to do so. Quite a bit of genius involved there. You see, the pros saw this coming when the VIX was in the $40's and upper $30's. They sold short and held their positions patiently waiting for the right time to cover. Now the 'bagholders' are actually those who sold shares short to the pros. Only problem is the bag is imaginary and at some point real shares will have to bought back to cover. Currently it is only safe to short these in a day-trading time frame. Oh, yeah, another problem, the only way to get people to sell their shares now if they haven't already is to entice them by raising the price. Arbitrage permits the trade price to deviate from the Indicative Value regardless of contango. Finally, the market is quite "toppy" looking and as more and more bulls get nervous, the spot VIX will rise, eventually quelling contango, even as the market rises this last little bit (my estimate S&P tops out at 1434 (+\-6)).
      So to summarize, shorting volatity just because of contango at these levels is like playing with fire. It made sense in early winter, and will make sense again, but not now,IMO.
      But hey, go ahead and go short if you must, but please post on here when you get in so we can enjoy your success by proxy.

      Good luck.

    • Save it!You realize we realize that?Go long or something will ya?Oh do you realize this can pop like pharma?Big risk big reward!

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