Starting to short volatility here too (scaling in, that is). Still short UNG, but I think Ukraine can keep it elevated.
Question for you, if you feel comfortable answering. You mentioned taxes earlier this week. How do you treat borrowing fees for short positions? Any pointers to IRS docs would be appreciated. Or PM me at elitetrader if you prefer.
I generally look at an absolute level on the spot VIX to determine when to start scaling in. For me, 16-18 is a bit too aggressive. At least you maintain a relatively short bias elsewhere, but I agree...risks are rising here. Again, I think a spot VIX in the 13's is just too complacent and 14 to 16 is no-man's land.
It's okay to take profits on VXX quickly (either long or short). Noticing that volatility initially tends to whipsaw as markets grasp on to any piece of good news. It becomes more sustained when the euphoria wears off and markets realize there is no quick fix.
My one rule is "don't short volatility going into a crisis; only on the way out." Learned that lesson in 2011! Things could have easily gone the other way in Ukraine, and may still...
Shorted half a position of ATHN today too.
Do you still have your ATHN open? I closed a day too early. Friday was a great opportunity to close, unless you are waiting for a serious correction.
VXX has been twitchy recently. Noticed a few momo leaders started to fade on Friday (CRM, SPLK, WDAY) while VXX was still down. A VIX in the 13's may be mispricing the risk at these levels. Can't really see what sends the market higher from here (maybe the job's report? unlikely with all the bad weather recently)
Had some UNG taken back from me this week. Weather map in New England shows a lot of blue well into March. Thinking UNG goes higher, but the correction this week is giving me more confidence to ride it out.
This natural gas trade could get nasty. I am back to even but anticipate going negative very shortly. Dennis Gartman is predicting $7 natgas. Be careful. -lf
We had pretty much the same playbook again today. Planning on scaling out of XIV further. Doubled-down on UNG today, a bit too soon but can fund this position well into the spring and summer. Starting to build additional short positions (DATA today, looking for others) with the goal of becoming market-neutral. Overall, investors seem to be paying way too much for growth here. It feels like the odds of a serious dip are going up with every one of these minor dips that the market shrugs off. -lf
One of the best up days here in a long time. NFP could be decisive this month, up or down. I also still think Puerto Rico is a bigger deal than people currently recognize. It could be a bumpy ride before we see VXX back down to 40. Still holding UNG short. -lf
The UNG short looks interesting. Less sure about a short VXX here. The news from Puerto Rico may stay in the headlines for some time. If so, the spot VIX will stay elevated and the forward months will rise. Things may calm down, but I think the risks are a lot higher here. Disclosure: long XIV, but reconsidering my position. -lf
Covered my short for a small loss today. Really surprised how well this held up through January. I would be with you long, but I see other opportunities I like better out there. -lf
I too started to build a position here, but I am regretting not closing before EOD. Need to be very careful about NAV adjustments after the close, particularly with the level of backwardation with respect to spot VIX. If markets don't settle down quickly, then VXX will more easily head higher. Unfortunately, Argentina could remain an issue for some time. Thinking we may be in a regime change here. -lf
Well played, sir. I too went short, although a couple of days too early. Still, I am averaging up (down?) here. We've seen this same playbook before. Main risk in the short term is that the PJM ruling comes out unexpectedly. Still, if volume dries up, then this likely drifts down.
This looks a bit toppy to me here. Personally, I have emptied my position (a day too early, unfortunately) but will be looking for a point to re-enter.
What did you decide? Personally, I have been scaling into a short VXX (well, actually long XIV) position.
Noticed an interesting phenomenon after the last fed meeting: looking at VIX futures, the short end of the curve dropped much more quickly than the middle of the curve. The curve generally steepened and the December expiration stayed elevated over the month, as traders likely anticipated the Fed taking action then. A trade idea: stay short VXX while hedging with a short ZIV.
I've enjoyed your updates on this "hidden" message board. Congrats on a great 2013 in a challenging environment!