"he is essentially right. the lowest risk way to short uvxy is through puts, which are as liable to expire worthless as calls, unless one is very lucky in one's timing. "
pik, of course you are correct that selling UVXY or TVIX outright short is the riskiest way to "short vol".
My comment did not imply that shorting UVXY was my drug of choice, just that it still works. In comparison, sure beats shorting VXX which has no β decay.
But straight puts with months out expiry on UVXY now provide relative paltry maximum percentage returns compared to a year ago. 90% of my specs are now in the form of vertical spreads and remain very lucrative.
And you're correct again; one should keep plenty of dry powder in this game to avoid margin calls and to pounce on price spikes!
"I started avoiding leveraged ETFs after I learned maintenance requirements for leveraged ETFs are 100% rather than 60% (30% x 2 leverage)."
OpGuy, are you sure about this?
I just checked my acct. My maintenance requirement for TVIX is 100% (trading below $5 and new ETN FINRA regs) but "just" 60% for my UVXY short. Also 60% for my BIS short.
" I am a seller of naked $74 & $75 calls now. I think the chances of SVXY going below $70 are better than it going above $75 by June 21st."
It's not just about the VIX, but where we are in the cycle (day 1) and contango (18.39% spot to June and
6.74% June to July),
If the VIX remains flat for another two days, June could easily plummet another 30 cents popping SVXY up another $1.50.
But looking towards June expiry, mean reversion of the VIX takes front seat.
Most likely, the VIX will return to 13.5 to 14. July futures now at 15.01 would probably close at 14.5. My best bet for max SVXY at expiry is 76 to 77.
I think that your naked calls are a relatively safe speculation, iow there is a relative maximum that SVXY can reach in the short run when the VIX is so low.
BUT I think that there is an excellent chance for another 2% movement in SVXY in the next several days. If that happens, I'll be legging into spreads: selling OOM SVXY calls and selling UVXY puts against my long positions!
"Is it still going to 55.55?????"
Of course, nonobullshyte read it in a Chinese fortune cookie!
PS: Do you miss those q15 min pricing updates on the VXX options???
These after hours moves are meaningless. The VIX futures trade until 1615. The proxies close at 1600. The after-hours moves are the ETPs moving up or down towards their indicative/instrinsic value, nothing more...
Sorry, I disagree. In the long run, TVIX will approach zero, but in the short run, there are limits to how low and fast TVIX can fall.
For TVIX to slip below 4, a 15% drop, in the next week or so, the VIX would need to slip below 11. I think that that is very unlikely... Certainly possible by the end of June in the best scenario!
Excellent explanation Bustin. Any thoughts as to what is causing the pressure on the VIX futures? Some suspect Fed manipulation as one mechanism to keep upward pressure on the ES, etc. Not certain I buy that, but TVIX has been in these oversold zones before from a technical perspective (late January), and wonder if this is an opportunity? No doubt it ultimately depends on the general market direction, and there are multiple crosscurrents occurring, and still only a percent or two from historic highs (Dow & S&P 500). My crystal ball is very cloudy:)
First, with all due respect, one cannot perform traditional t.a. on TVIX or the other VIX proxies. TVIX cannot be oversold or undersold. Short interest is moot. Moving averages, dojos, candlesticks irrelevant.
If you want to fully understand how TVIX works, you need to begin with understanding how the futures market works. You need to understand the terms contango and roll yield. You must understand the dance between the spot VIX and the front two VIX futures. You need to know how VXX is constructed. You need to understand the mathematics involved with leveraged (levered) ETPs. You need to understand ETN vs. ETF.
You should start with the excellent videos at Khan Academy regarding futures and contango. You can find other videos searching on YouTube.
Most of the articles on the topic on Seeking Alpha as fair, but the reader commentary is often excellent.
"TVIX is indeed a scam"
No, TVIX is NOT a scam. It delivers exactly as promised in its prospectus and its chart will continuously asymptotically follow a path towards zero until the note is retired.
Why not take advantage of its penultimate destiny. I do and TVIX pays for my daughter's tuition...
"Don't let the strong hands force the weak hands."
There are no "strong" or "weak" hands at play. TVIX tracks its intrinsic/indicative value which is a mathematical equation. It couldn't care less about volume, candlesticks, dojos, moving averages, or even those nefarious "shorts".
"I lost patience with this stock"
TVIX is not a stock.
It is an ETN which happens to be a derivative of a derivative of a derivative of a derivative of a derivative.
"The problem is more than just the drop it is the reverse split that destroys investors money. A 10 for 1 split and within 6 months that stock is less than your shares now. So, 9 of your shares have been destroyed for 0 worth. If they would just let the stock sink it would be fine. Also on a reverse split the split should not be recorded as a high for the stock it is misleading. If anyone hears of a split please post it and get the Hell out fast."
From the viewpoint of portfolio value splits, both forward and backward, are absolutely MOOT.
For example, let's make an assumption that I was short 10000 shares of TVIX on March 4, 2013, at $4.62 before the last 1:10 reverse split, my short account had a balance of -$46200. Today I would be short just 1000 shares and need to pay $4640 to close out my short position.
Had there been no reverse split, I would still need to spend the exact same $4640 to close out my position. But I would still be short 10000 shares but TVIX would be trading for 46.4 cents.
And without a doubt, most likely, absent a reverse split, in 12 to 15 months TVIX WILL be trading for ~ 46 cents.
The reverse split DID NOT destroy the value of TVIX.
The relentless deterioration of TVIX was caused by contango and the so called β decay inherent to levered and inverse ETPs.
If you don't understand what I am talking about, you shouldn't be swimming the the TVIX mire...
"Bustin - I am okay for the truce and will also be removing the IGGY placed on EM once a) he stops associating me with BOB b) agrees to disagree and stops posting his nonsense c) removes the EM handle he created when the EM scare was the hour of the day which no longer exists with SVXY at all time highs ..
I am highly sophisticated in everything I do and it is not to my liking that I was forced to TRASH down EM. I can stop with that provided he agrees to the above conditions '
I've read just about every post on all 4 Y! VIX proxy boards for the past 18 months just hoping to find a pearl or golden nugget that might add to my fund of knowledge. But the noise to signal ratio is usually deafening.
I remember when all of you guys were civil to each other and really don't fully understand how the civility devolved to the nastiness and relentless "idiot!" and "moron!" and other insensitivity.
Actually I think that e.m. has made some very enlightening comments that has given me food for thought. And both you and Bob make excellent points as well. But all three of you at times have become a bit obnoxious hammering the same point over and over and over and over and over and over and over again. Please, say what you need to say once or twice and move on. And just respectfully disagree with the others point of view.
I have participated in investing bulletin boards since prior to the web-browser dating back to alt.finance and Prodigy, Compuserve and AOL. A bulletin board is a community; a healthy bulletin board is one where civility rules and juvenile and hateful behavior is not tolerated.
Please drop the animus!
Please agree to disagree. At least all of you understand the basics of svxy and hopefully are all making money. Your juvenile bickering ruins the one halfway readable proxy bb here on Y! You guys are above this!
Instead, please redirect your cynicism and sarcasm to the TVIX board where a dozen knuckleheads, who refuse to educate themselves, hold a continuous pity-party circle jerk using their favorite terms "manipulated", "conspiracy", "criminals", and, of course, "SCAM!!!" They are truly pathetic and obnoxious and deserve all the scorn that you can send their way.
Both VXX and TVIX are ETNs, electronically traded notes. They hold no assets. Their value is derived from a mathematical formula.
Because they hold no assets, they have no NAV, net asset value. Instead the industry uses the term, IV, indicative value interchangeable with intrinsic value.
VXX and her IV are rarely identical; there usually is a trivial premium or discount. TVIX has traded at a significant premium for years. It peaked at 10% last spring and now fluctuates on a daily basis btwn 2-6%. Because of that fluctuating premium and other misconceptions, most folk believe that TVIX is “broken”.
VXX is essentially the S&P 500 VIX short-term futures index. The VXX-IV minute to minute percentage changes are identical to that of this index. Yahoo publishes the indicative value of VXX as ^VXX-IV. This is updated realtime every 15 seconds.
Y! not longer provides the ^TVIX-IV but it is provided by some brokers. The TVIX-IV is updated at the velocitysharesetns slash TVIX every evening.
closing price $4.83
One can calculate the premium of $.14 or 3%.
TVIX close 4.74
Premium has shrunk to 0.7% at close.
on a day to day basis, the percentage change of TVIX-IV is x2 that of the percentage change of VXX-IV.
Tues closing VXX-IV 36.06, up 0.27%
Tues closing TVIX-IV 4.72, up 0.64% (in the ballpark with rounding error). AND disconnected with closing TVIX, which was DOWN.
Because the premium of TVIX may expand or contract day to day, there is no perfect correlation to VXX.
Over the course of days, weeks, months there is NO correlation to VXX because both levered and inverse ETPs suffer from so call β decay. Google or YouTube “leveraged inverse ETF decay” to get a detailed explanation.
Regardless, play the dark side of TVIX instead of playing the lottery ticket and watching your portfolio shrink.
"I still have my VXX core shorts"
OptionGuy: time for one more quick comment.
Why be short VXX at all? Why give up the β decay of TVIX or VXX? Superimpose a chart of VXX, SVXY, and UVXY and locate a VXX "round trip" over a oeriod of several months. While VXX is unchanged, SVXY and UVXY will always decline in price.
I'll have to assume that you don't wish to recognize those delicious gains.
I might buy a debit put spread in VXX if the numbers are right. And I might very briefly buy VXX as a VIX spike is developing. But I never, never short it. No reason to...
"So if I'm understanding this correctly, goodoptday is going long volatility by selling OTM calls? A change in outlook? I really don't understand these derivatives of derivatives. I went long VXX today (spot vix of 12.5 at the time), but I'm of course open to better ways to buy vol. Suggestions?"
Credit yourself for recognizing that VXX is a derivative of a derivative (of a derivative of a derivative of a derivative).
Yes, selling calls of SVXY could be construed as going long volatility.
But you can also look at things this way; because one can make projections every month based on the VIX futures expiry, when the VIX is this low, one might envision a max possible price for SVXY in 4 weeks and sell a call based on that "guess".
If you "must" buy vol, i would buy VXX and never UVXY or TVIX because the latter two suffer from the so called β decay of levered ETPs. Or you might wish to shorttSVXY or but debit call spreads of VXX or UVXY. or put spreads of SVXY.
But I'm permashort vol with an occasional partial hedge of short SVXY calls...
" It obviously seems this etf is not honest time over time based on the major market index."
"VIX should move based on major indexes."
"Someone should pay for this corruption."
"It obviously seems" that you invested in an instrument that you do not understand. It has nothing to do with a major index. And it has just a bit to do with the spot VIX. But it has everything to do with a rolling composition of the front two months VIX futures.
NO corruption here. Sadly you paid for your ignorance regarding TVIX.
PS Google or YouTube "contango" and "leveraged etf decay"
"VIX should move based on major indexes."
Why should it? It is a derivative based on a derivative, the implied volatility of a select group of options....
"Sold 5 SVXY Jun OTM calls."
I think that you may be several days too soon. If the nearly identical numbers (VIX and futures) from last January repeat themselves, I'm hoping for another 2% drop in June futures and 2% gain in SVXY by the end of the week.
Then, I'll be slamming those June OTM SVXY calls as well.
Just my opinion, amigo!
1/17/14 1/22/14 5/16/2014
^VIX 12.44 12.84 12.44
front future 13.45 13.25
back future 14.25 13.85 14.65
VXX 41.13 39.97 36.55
UVXY 15.54 14.70 44.50
TVIX 6.83 6.51 5.01
SVXY 139.51 143.26 70.36