This looks to me like it is going to be a correction with a recovery in short order. We aren't entering a major recession. So this is nothing more than taking the froth out of the markets so value hunters have a reason to buy back in again. I would say that in less than 2 to 3 months we will be going up again and at most we will be 10% down from the previous high.
I would love a 20% correction now that I am near 100% cash or short but I don't think it is in the cards. Not with the fed having the flood gates open.
Printing money doesn't flatten the economy. In fact it makes it more bar bell than it already was. It does nothing to fix our trade dilemma and the fact that most of our middle class jobs left the country. We need new trade policies to do that and you aren't going to get them with the current admin. because that would require action.
I told a young man out of college the other day to go get a government job. I then said that I would despise him for being part of a corrupt system that drains the life blood out of our economy but then he could ignore that and simply not care. That is what all the other government workers do. I said you can be like it was in the feudal days when you had the elite class as part of the king’s court. They didn’t care who suffered for their benefit either. No one does.
I use Fidelity. I used to have the same problem as well. They told me that on hard to borrow shares I had to call in to let them know that it was OK to go outside the broker and pay interest to borrow shares. I told them it was OK and that I wanted them to assume that it was OK from then on. They had me fill out some paper work to that effect and now when I try to short it shows me the shares available for borrowing in the entire US market, not just Fidelity. And my short sells always go through. When I go to Interactive Brokers web page to see how many shares they say are available to short it agrees with the amount that Fidelity tells me. The Interactive Brokers data is available to anyone. You don't have to have an account with them to see it.
I can imagine that there are times that when so many people are shorting a stock that they run out of shares everywhere but that is not the case for TVIX. Currently there are over a million shares available for shorting.
You need a margin account to short. And if you are having trouble you can always call in and have them place the trade over the phone. They should not charge you extra for a case like this. And while you are talking to them ask them how you can make this process automated so you don't have to keep calling in like I did. If they say they cannot do that then I would suggest switching brokers. I have no experience with scottrade. I only understand that they are cheap. I am not sure what that implies in terms of the level of service you get. You tell me.
Are you expecting a recession in the near term? Because the VIX makes it to 40 under those conditions quite easily but it is rarer otherwise.
The VIX exceeded 40 in 2008 as we were entering a recession. It kissed 40 in 2002 under similar circumstances. In 1998 it exceeded 40 when the market had a major sell off due to extreme over valuations which are not the case today. No other 40 level VIX events happened earlier than that going back to 1990.
However in Sept. 2011 the VIX exceeded 40 during a major 15% market pull back which was more reactionary than similar pull backs in the past. So if we get another pull back like that then you may be right. If that happens then we would be going from one of the lowest volatility conditions in market history to what would be considered a rare moment in very high volatility. I guess you can always hope.
It could be we are going to get larger volatility swings in the future because investors are more reactionary to market conditions. I won't claim that this is not the case because there is not enough data to say at this point in time. However it has never been wise to base investment decisions on the premise that things have changed from what they used to be because that normally isn't the case for very long. But then, there is always the rare exception.
I'm am of the opinion that we will not see 40 and most likely we won't see 30. And that is because I believe that investors are overly complacent lately and they haven't been shaken out of that compliancy yet. However, I am making my reentry into SVXY cautiously by not assuming that it won't go to 30 or 40. And that will probably cause me to buy less than I would otherwise. But one must always have a lot of dry powder when investing in these high volatility stocks because it can be the death of you if you don't.
I just made my first SVXY buy today for about 30% of my size goal. Just in case the VIX is not done rising.
Two 10 to one reverse splits ago. TVIX's underlying is a futures contract and futures contracts lose value with time. That is why it is better to short the peaks and ride it down because the price decay is on your side. I have never bought this stock long. I only short it. And I never lose money. Only when I first enter a new position am I red for a short while as some of my shorts are before the peak occurs on the way up. But this stock always goes back down so I know that this is temporary so It does not concern me. In the long run TVIX is always lower as you see in the chart so the short always wins in the end. Isn't it obvious?
I don't see the connection.
I agree that the Fed can debase the dollar thus taking value away from our savings but I don't see how this causes a default. I really don't.
Keep in mind that the talking heads are blaming this sell off on Ukraine. So if the focus of the news switches to something else then no one will be thinking about Ukraine anymore. Think about that if you are trying to get a heads up on what to do next. One can never tell when the Putin’s in the world will stir the pot but one can also never tell then they will stop stirring the pot either.
The markets often move for reasons that can come and go. It is not as reliable as a sell off that is caused by the start of a recession that isn't going to go away on a whim until it goes full course and thus is guaranteed to create market havok. These world events are not as predictable as that. I'm sure the CIA would love to know what Putin is thinking. But they don't.
It would have to go up 800% from its $2.70 low to do that. That would only happen if we had a major crash. The market is not nervous enough for that right now. At least not yet it isn't.
About as high as the VIX has ever gone in relevant history is 80 and it is usually sitting at about 20 for a long time before it shoots that high. 20 is a pretty nervous VIX. We have been sitting closer to 10. That basically says that most investors only have one eye open as if no wrong will ever come their way. First they need to be spooked out of that state of complacency. They are still very complacent at this time. When we go to 20 and stay there for 3 to 4 months then you can assume that they are fully awake again and getting more concerned about the state of their investments. That is what you need to get the fire in the crowded theater scenario. At least that is what I am assuming based on past market behavior as I have seen it over the last 20 years.
Look at a chart of the VIX from Jan 2008 to 2009 and then you will see what I mean.
There must be a god for us born again atheist. Who ever he is then evidently he was listening. I promise to have only positive thoughts about the super one from now on.
I'm thinking of adding more to my short position. This market correction is starting to look pretty undecided. We still don't have the fire in the theater panic scenario yet which is what I was hoping to see. I am kind of disappointed. I wanted more. And thus I am resigning myself to the belief that maybe this is it so I better short more while it is at least this high.
That said I am using caution. Because I don't want to be holding a lot of low priced shorts if this stock takes off when I could have used that money to short higher. That last correction in Feb. seemed to be a lot more assertive than this one.
For others who are thinking of shorting as well, keep in mind that you need enough cash in your account to cover the value of the stocks if it increases from here. Never short the entire account. That is too risky. You need some padding. DON'T GET GREEDY. All this does is teach one a very expensive lesson if things get out of hand. This strategy should only be a portion of your portfolio. You know the saying about all the eggs in one basket. That advice doesn't get handed out so regularly because it is unwarranted. It is warranted. This is a critical time. Be cautious. Don’t jump the gun but don’t get left out either. Work into it in stages and cautiously.
Most of the reasons for having a margin account have nothing to do with buying stocks on margin. And most sensible investors don't do that. I never buy stocks on margin except for the few days that it takes a trade to clear if I decide to back out of it early and I don't have enough cash to cover it. All you are doing is using margin to get around certain trading restrictions that have been imposed over the years that resulted in these unintended consequences which margin accounts solve. From what I have seen, it is very rare to run across an experienced investor with a cash account. It is too much of a liability.
When I opened my first brokerage account I was asked if I wanted it to be cash or margin. So I asked what that implied. He explained to me the differences including getting around the trading restrictions. After hearing that it was immediately obvious to me that the only way to go was a margin account even if I never bought stocks on margin long term. Some trades you simply cannot do without margin.
For one, I believe that you cannot short in most cases without a margin account because you are selling borrowed shares. And since the most profitable way to trade TVIX is to short it you are only left with the option to buy it long which is VERY risky and requires immense insight into market moves to be remotely successful. Whereas an investment moron can make money shorting TVIX. That moron would make more money shorting TVIX than the most clever long ever would.
You really need a margin account if you want to make quick trades. It is the only way to go. Now if you are a long term buy and hold investor only and never want to short a stock then a cash account will do. But then you should not be investing in TVIX. Because you either buy this stock short term or you sell it short long term. Neither of those scenarios can be implemented very well in a cash account. You have the wrong account type for this stock.
The price of tracking stocks are not affected by the buying and selling, only by the price of the underlying. You can buy and sell all you want and it will do nothing to the price of the stock.
No need to get upset at the shorts. I would like it to go higher as well because I am not done shorting. This is a tracking stock so nothing that we do impacts its price. So there are no enemies are allies unless you are looking for emotional support. Because stock price support is not in the cards. Tracking stocks do not work like that.
As I keep saying. The easiest way to make money on TVIX is to short it. As long as I keep shorting at prices that I know are higher than it will be at some time in the future I know I cannot lose. Because of the contango decay I know this will always work out for me eventually. But the long has to time it precisely or the contango decay will eat away all his profits and then cause him to start losing eventually if he does not sell.
As it goes up, how do you know if it has peaked? You don't so you are tempted to hold and then it starts to go down. How many longs are still holding hoping that it will go up tomorrow? What if it keeps going down?
As a short I don't have to care about that because I know it is going to go down eventually so I will always win. These peaks are temporary and thus they are short selling opportunities.
I hope it goes higher. I am really disappointed that I was not able to short at a higher price. But then if it doesn't there is no harm other than I could have made more. But I will still make money. I can't lose money. That is nearly impossible because I only short a small percentage of my account. I have enough head room to handle any possible scenario.