I have made more money on TVIX than any other stock. But then I have only shorted it. I cannot imagine why anyone would buy it long. That seems insane.
I sold AGNC in the mid $30s and walked. I never really held it that long to make much off the 20% dividend. Most was off the stock price appreciation. Since then I have been investing in VIX volatility. I have been shorting TVIX and buying SVXY each time the market dips. I have been investing 30% of my accounts in this trade and leaving the rest in cash and my accounts value, including the uninvested cash, has gone up 80% in accounts where I could short TVIX and 40% in accounts where I bought SVXY.
I look for opportunities where ever they ly. Next year it will be something else. The investment style of learning how to invest in one thing and sticking with it has never worked for me. It's not profitable enough for my taste. And it is usually the case that once I make money doing something I rarely go back and do it the same way again because there is always something that is better to do at the time.
If the Fed does what I think it will do in 2015 then the people on the right side of the trade won't be owning AGNC. And the Fed doesn't even have to do it to get the price started down because everyone already thinks that they will do it. There are safer ways to make money right now. Owning AGNC now is like leaning over the edge of the Grand Canyon being held back by a narrow string about to break. If you like taking changes then fine. Do that. My guess is most don't even realize the situation they are in. They have this feeling that their money is safe because they don't understand interest rate cycles. The unemployment rate is getting low enough to cause wage inflation and the feds job is to prevent that. Want to assume that the Fed is incompetent? Go for it. But you won't be happy.
All you should be thinking about is when the Fed will start to raise interest rates.
No way late, if the Fed raises rates as much as they normally do you won't be able to sell these low interest rate loans for half their face value. Why would anyone buy a 3% loan when they can buy a 6% loan? So you have to cut the price of the loan in half so it pays out as much as the 6% loan. So what do you think that will do to AGNC's book value? It will get cut in half and the stock price tracks book value. You're basically talking somewhere close to $10 give of take a few. I can short anywhere above $15 and make money. Just think about it. Its not rocket science.
I'm almost ready to short this thing. As soon as the fed anounces that it is going to start raising rates. I might not get in at the highest price but at least I'll know for sure where this thing is headed. Too many people tried to predict the Fed ahead of time and their money has been stuck doing basically nothing. I want to hear the fat lady sing first.
Not sure what you mean that lower rates imply lower stock prices. Lower rates cause bonds to be unattractive which is the competition for stocks. Also it allows companies to borrow money at lower rates allowing them to expand and to make higher profits as their borrowing cost are lower. This lowers PE and thus gives the stock price the ability to increase. Basically you should be able to borrow the money to buy a company and have the profits pay for the interest on the loan or the company is over valued. Thus lower rates allow you to still accomplish this with a higher stock price. I think you have it backwards, higher interest rates causes stock prices to decline. Lower rates is cause them to increase, if nothing else has changed.
If we correct I think it will not be anything like 2008 because the US economy is not showing signs of entering a recession. Minor corrections are common. That’s what we live for. And is why I am not short TVIX right now because I'm guessing there is a better entry point in the future.
You cannot ignore the price of oil. But it is confusing because in the past oil price fluctuations were basically due to changes in demand. But in the last few years there has been an unprecedented surge in surge in supply. So it is harder now to conclude that lower oil demand implies that economies are slowing down world wide. There may be some of that but the US economy is growing. So the jury is still out. We really don't understand this yet.
In any event, a lot of investors may interpret the current situation based on traditional metrics and thus we are likely headed for higher volatility until people figure out otherwise.
Everyone who is making money on this stock is shorting it on peaks. If you are long and losing money then that isn't the fund manager's fault. You're just on the wrong side of the trade. That's on you.
I covered my short for a break even. It looks to me like volatility might be higher for a while given global financial instabilities so I decided that my short entry and exit points were too low now. Im not sure what my new strategy will be. I just know it isn't likely to be what it was. I will watch the VIX index and try to determine how it is more likely to behave from this point on. All I know is that volatility has increased and seems to be leveling off for longer than it has done in over a year. This means that the market is not behaving as it was so maybe I need to take this into consideration. I'm certainly not going to leave my money in the market until I think I get a better handle on this as that would be foolish.
If there was no contango decay then one could easily argue that the risk were the same. But look at the two year chart and see what the decay does to the stock price and then try to argue that it is safe to hold this stock long based on what you see. Anyone trying to make such an argument will look like they are incapable of drawing accurate conclusions once given the facts.
Second, you want a stock that has an easy exit which means its price is stable about the time you want to exixt so you have time to make your exit decision. But these peaks last less than a day so most longs allow the peak to allude them and sell too late. So the gain they imagined they would get by looking at the chart they never actually get because they didn't have time to decide that they were at the right time to sell. Then they get trapped into holding because they missed it. Then they lose it all. The short on the other hand has all the time in the world to cover because the VIX levels off between peaks.
Note that all the long term posters on this message board are shorts. The longs never last more than a few months which is the amount of time it takes for them to tire of losing money.
And there is another thing you can count on. TVIX is a futures investments so they are buying future options whose value decay with time. This means that TVIX's price will always go down long term. It has to. So the long term investment strategy favors the shorts. The the buyer of TVIX has to play short term, on the order of days, not even weeks. This is the opposite of most individual stock investments.
Also the entery point of the long is rarely precisely timed. They usually buy way to early so they incur significant contago decay as they wait for a peak they have no clue as to when it will occur. Could be a week, could be 6 months. They cannot predict it. The short on the other hand doesn't even consider his position until he sees a peak forming. Thus there is no guessing. He enters after he knows a profit is guaranteed. Not before. Thus the shorts investment approach is very low risk. The only risk is that you start to short and the VIX goes much higher. And thus the reason for only investing 30% of your portfolio so you can wait it out.
I also enter over a period of 2 to 3 days shorting some early, some right at the peak, and some late. That way I know I get some good hits. I still make money on the first and last positions just not as much. But if you don't do this you may miss it altogether or short it all too soon and make less. Both senarios being worse than what I do. That said this last peak came quicker that I had expected so I missed the first position. Got one in at the peak and one in late. It's a plan, but its not written in stone. You try to do your best.
I'm still short. It hasn't gone below 15 yet.
What I like about this is there are a few things you can count on. One is that the VIX will always go back down eventually. Unlike a stock that can keep going up forever the VIX will always come back to below 15 eventually.
You need to be cognizant of market conditions. Right now 15 and 20 are good trigger points but we are in less volatile times. At other times these trigger points would have to be raised as volatility would be too high for these points to work. What you are trying to do is set the lower trigger point slightly higher than the typical bottom and the higher trigger point slightly lower than a typical top. So obviously as the typicals change so will the trigger points.
I have done this 4 times since I figured out that this stock is always eroding downward with time making it very safe to short. Once I determined this in January of 2014 I entered my first position shortly there after on the first VIX peak. I have done the same thing on every peak since then. Not once have I walked away with less than a 20% return. I have never lost money doing this.
If there is a long gap between peaks this stock erodes downward because of futures contango. That kills the long who is waiting for the next peak which he has no idea when it will be. Then he has to sell with in a few hours of the peak to get his money back. The short on the other hand doesn't invest until he sees the peak is occuring so there is no guessing or waiting. Then he gets out when he has made 20% to 40% profits. Don't get greedy. I know the chart says you can make more but then you may lose the sure thing.
I only short about 30% in case we have a black swan event. But this would only happen if we enter a recession and negative unemployment reports are always forth coming before the market reacts. In that case you should be all cash and doing nothing.
I just keep shorting it every time the VIX goes above 20 and cover when the VIX goes below 15. Have never lost a dime doing this. Works every time. And since my account keeps growing at an outrageous rate my positions keep getting larger and I keep making more. This is like free money.
This positive jobs report pretty much says that there won't be a reason for the Fed to not raise rates. And I agree that since oil prices will reduce the cost of energy and thus the cost to produce anything this will help companies keep cost down and also will give consumers more money to spend. However what I am not certain of is will they raise rates more aggressively in 2015 or 2016. And there is the housing market to consider as a lot of people are now getting home equity loans and this is adding stimulus. Also they are loosening lending standards. Actually what they did was more accurately define what would be the level of liability of the originator for a bad loans so they don't have to imagine the worse case scenario anymore. They can more accurately quantify their risk. Thus it is assumed that lending standards will get looser as a consequence.
I'm still playing the market volatility. I've shorted TVIX on 3 VIX peaks which corresponded with market dips and my combined rate of return for this investment strategy has been 85% since Feb. 2014. Since the rate of return is so high I only have to invest about 1/3 of my accounts' worth and leave the rest in cash. As a result my accounts have trended up at a very low rate of volatility, contrary to what one might have expected. In my IRAs I buy SVXY since shorting is not possible. Since I'm batting a 1000 with this strategy I think I will stick with it as it seems easier to determin a safe buy in and exit. I like the fact that high volatility always returns to low volatility eventually without exception. Thus a safe exit is guaranteed given enough time.
I've never seen so many people wrong so consistly. It's as if you desire an outcome so you site every possible event as a reason for that this outcome. Yet it never occurs to any of you that most of you don't know a thing about predicting future outcomes. Your just making it all up from random thoughts with no real basis other than it came to you in a day dream.
The amount of TVIX shares is always changing to meet supply and demand. The arbitrage traders make sure of that. These traders are allowed to create new shares or retire them as the need arises.