It is not clear from your tall claims whether you are long or short VIX . Or do you trade either side, based on the trend ?
You have been claiming that you can feed unlimited money into the VIX-futures market. Do you mean the long side ?
Do you mean you are willing to go long VIX futures with unlimited money ? What exactly is the extent of your "unlimited" money ? Is it $1B, $10B, $100B ?
It sounds like you are trading VIX on your own, without using the ETF/ETNs. Is that right ?
When you take a position approaching or exceeding $1B in VIX, can you let us know ? Then we can verify the VIX open interest. Otherwise it is just hot air.
yeah i think we can safely ignore the svxy to $1B crowd and not miss much.
Really ? Just take a look at the VIX futures open interest (not trading volume, but actual open interest) from the time before VIX ETFs were there to now. You would see a clear correlation.
Even today, add up the value of the open interest and compare that to the total value of the long-VIX ETFs. What you find is guaranteed to surprise and enlighten you. I will not do that for you. Please do it and do yourself a favor.
Just locate the CSV files showing the daily outstanding contracts by date from CBOE site and look inside. You would see a very strong correlation to the 30-day average maturity of the the short-term VIX-ETF/ETN holdings.
The VIX ETF/ETN's are not just participating in an organic VIX mkt (by "organic" I mean a VIX mkt driven by the need to hedge). Increasingly, these ETF/ETN's are controlling the VIX mkt. If Fedrally and Bobwins keep their holdings till SVXY reaches $1B/share, these ETFs/ETNs will become the VIX mkt.
Nov XIX expired yesterday... SVXY yawned.. S&P has been making new highs at least once or twice every week.. SVXY has yawned...
Whenever this kind of quiet, slow crawling-up in S&P has happened in the past three years, it has given explosive growth of the order of 15-20% per month to SVXY, right ? So, just WHAT is UP ?
The unstated factor there has been that the long-VIX funds' corpus has remained MUCH higher than the short-VIX corpus, thus providing an easy fuel for maintaining high contango.
For the first time in history, the short-VIX funds' corpus has nearly matched or exceeded the long-VIX funds. We are likely seeing the effect of that in the refusal of the short-VIX funds to just balloon higher almost spontaneously.
Imagine if short-VIX funds' corpus keep growing and someday reaches 3x-5x the long-VIX funds' copus. What will that do to your wet-dreams of $1 billion/share of SVXY in 20 years..
NOTE : However, if we continue to see outflows from short-VIX funds and their sizes remain a fraction of the long-VIX funds, the growth in short-VIX funds will become much more spontaneous.
The spot VIX is not tradable. Spot VIX is just a calculated number based on actual S&P options pricing.
Only the futures are tradable. The time value (if you will) of a future - that is the difference between the future's price and spot price - is going down gradually. On the day of expiry, the future is settled for cash value equal to spot price. The time value is more often positive, but it is not uncommon to see negative time values too.
Futures do go down usually on Friday, because on Monday morning it will be three days less remaining in the life of the futures.
And would those strategies produce money for you WITHOUT SOMEONE ELSE LOSING THAT MONEY on the other side ?
WHY would the big boys (or whoever) want to buy 100 times more VIX futures than they are doing today ? Unless the S&P market cap increase 100 times, why would the long-VIX mkt grow 100 times ? Especially knowing well that a long-VIX position is a decaying asset over time ? Unless you have a house that is 100 times more expensive, you won't pay an insurance premium that is 100 times more... would you ?
I will separately post a link to a CBOE spreadsheet showing the outstanding Nov VIX futures on a daily basis. You would be able to see how the outstanding volume peaks just about a month before the Nov VIX expiry. So much for the "big boys" theory.. The tail is wagging the dog. Get real, guy !
I don't know what knowledge you have, that I don't have... I would love to learn if you give me your knowledge.
I have no problem in believing that you might have made 700% - from 10K to 70K or even 100K to 700K. I have never diputed that.
My point is, it is NOT scalable. If you had invested $10B in short-VIX (does not matter if you bought SVXY, or XIV, or used your own VIX trading), do you think you would have been able to grow it to 70B ?
That is where you and I fall out with each other.
For the first time in history, the short-VIX funds total sizes have almost caught up to the long-VIX funds. Let the total of short-VIX funds grow to 5x or so of the total of long-VIX funds.. IF AND WHEN that happens, let's re-convene and see how contango is behaving.
I haven't owned this stock for very long. I had it for a short while in Sep. Wrote covered calls, and got assigned. I just re-entered today.
I am aware of the macro events that you are referring to. I don't think Fed can be blamed. Mkts are making new highs almost daily. Oil, sure, has a role.
The analysts' 12-month target shown on Yahoo continues to be ~$18. Is it actively followed by analysts ? Is that a credible target ?
What about CSIQ and SPWR ? (I can perhaps research them, but if you can share them in a brief manner, I would certainly appreciate )
Yes, the most important thing to remember is that for SVXY fund size to grow exponentially, someone has to be feeding real money every month into long VIX futures... and it is just not possible.
If you are among the few true believer who continue to hold, while others keep liquidating (keeping SVXY total size modest), SVXY share price can keep growing at a decent pace.
Then, there are going to be times SVXY will be a very attractive AND low-risk buy.
Currently I have leap calls on SVXY. My break-even is around $88 (strike + premium). I am selling weekly out-of-money calls for $0.20, $0.25 ... Last year, it was very hard to sell calls.. you got better premium, but you also got assigned (or had to buy back at a loss) very frequently. This year has been a bit more predictable in that respect.
Let's grant for a moment that it were to happen..
SVXY quadrupled every 6 months.. that means, it grew 16x a year for 2 years. SVXY reached $1million/share.
Then one day the market burped a bit. Front-month futures went from 1 to 2, M2 futures went from $1.5 to 3.
SVXY went from $1million/share to $0.0000/share.... Right ?
Enjoy your amazing dreams !!
You can see $1million/share in SVXY, but only if a handful of SVXY shares exist. You cannot be one among millions of SVXY shareholders AND getting that wealthy off SVXY.
First of all, you have to dissociate the spot VIX (which is based on the current options pricing on S&P stocks) from the VIX futures prices. We know for a fact that there are times when spot VIX is higher than the front-month, or even the second or third month VIX futures. Similarly, there are times when M1 VIX could be higher than M2, and so on. These usually don't persist for very long.
The reason there is a contango in VIX is that there is a little more demand for the longer futures than the shorter futures. The long VIX funds are part of the demand for the longer futures, and the supply for the shorter futures, adding to the contango in the process.
There is no mathematical certainty for contango, unlike options on stocks. For example it is mathematically guaranteed that Intel $35 calls for next month cannot be lower than Intel $35 calls for this month. WHY IS THAT ? That is because if it were to be true, then I could buy next month $35 calls, sell a current-month $35 call against it, and pocket a "guaranteed" profit. That is why this is a mathematical impossibility. However, this is not true for VIX futures. I cannot spread a current-month VIX future against the next month VIX future, hence backwardation is possible. Contango/backwardation is determined by relative demands for near/far month futures.
When VIX futures are used only for hedging - like they traditionally were (and VIX funds didn't even exist), contango is the natural thing to expect. VXX helps enhance the contango. If the short-VIX funds grow big, they will reduce contango.
Instead of M1-M2 being 50%, and M2-M3 being 50%, it can also be that M1-M2 is 0% and M2-M3 is 100% ?
It can, right ?
Dow (or S&P) and VIX futures are different things. Especially, the M1-M2 relative pricing upon which SVXY is based.
You know that. Why are you trying to mislead us by mixing them up ?
Regardless of Dow, SVXY can still be stuck in neutral if the short-side VIX funds grow much larger than the long-side VIX funds.
I have said forever that you cannot make INFINITE money every month out of VIX futures. The short-VIX funds can only make as much money as the long-VIX funds are going to lose every month. There is LIMITED ability and appetite on the long-VIX side, hence there is only limited growth possible on the short-VIX side.
In the past 3 years or so, even as the short-VIX funds' share prices have doubled every year, the total fund sizes of the short-VIX funds (SVXY, XIV, ZIV etc.) have always remained a fraction of the money being managed by the long-VIX funds (VXX, TVIX, UVXY etc.). That has helped keep wide contango in place (10%+ front-to-second month), and helped the short-VIX funds.
For perhaps the first time in history, the short-VIX funds seem to have slightly exceeded the long-VIX funds by total fund under management. If the short-VIX funds don't undergo constant outflow, the short-VIX funds can keep growing. If the total fund sizes of the short-VIX funds reaches 3-5 times the total sizes of the long-VIX funds, contango is going to be SEVERELY impacted, and growth of the short-VIX funds and the decay of the long-VIX funds is going to be SEVERELY slowed down.
So, if you keep holding your shares of SVXY, but other shareholders keep coming and going, you may see a $1million/share some day. If everyone holds onto their shares in SVXY, it will stop growing sometime soon. It is all about the total funds chasing the long-VIX vs. the short-VIX trades...
P.S. You will need a little bit of reasoning and intelligence to understand this.