The Lemon Fool

As a matter of fact, I _do_ short both "Volatility Index" (VIX futures) and "EU Volatility Index" (VSTOXX futures) on IG.

However, as you state, one has to be very careful to keep the potential exposure manageable - it would be a disaster to have to sell when the VIX is high! (In August 2015 wobble, I did close a VIXY short and replaced it with an equivalent SVXY long as it was getting rather large and a further increase in size would make me uncomfortable.)
Secondly, they are rather 'lumpy' - while VIXY/SVXY smoothly keep a 1-month average by combining the two futures, holding directly means it gets somewhat choppy when the time to expiry is short as it flails around all over the place.
Finally,the minimum bet amount is higher. I'm, shall we say, nearer the beginning of my wealth accumulation journey, so granularity matters - I like to ease into a position with small bets over a period days or even weeks. I can't do that at all with the futures.
All the above means SVXY is the most sensible for me for most of my position. The others at a bit of spice and in the case of VSTOXX, a slightly reduced correlation

It would be nice if IG would let me short futures further out, rather than just the next two, but they don't.
If I could, I would also short VIXM.

Vix Central doesn't seem to do VSTOXX, and the structure is often more complicated, but once can use these sites to look at the values.
http://www.eurexchange.com/exchange-en/ ... urityDate=
https://www.barchart.com/futures/quotes ... ll-futures

I also have a very small short position in ProShares Ultra DJ-UBS Natural Gas (BOIL) and ProShares Ultra DJ-UBS Crude Oil (ARCA), again because of the contango and the leveraged decay. I haven't a clue about the behaviour of oil & gas, apart from it is expensive to store, people on average seem to think it will be more expensive in the future & it fluctuates all over the place, so these are more of an experiment.

Thanks for the heads-up on the discount - though the futures roll over four times as much!

I like shorting.

Strange one yesterday, VIX fell 3.93% and is almost back to its lowest point but SVXY was practically unmoved, in fact down a tad, whilst contango is still present, although reduced from the prior day level. I track the daily movements in VIX, SVXY and contango/backwardation and you sometimes get these counterintuitive moves. I suppose it comes down to factors such as the basis between spot VIX and the front month futures. In any event I'm getting more nervous with VIX at these levels.

North Korea accuses US of declaring war
http://www.bbc.co.uk/news/world-asia-41391978

Here we go then...

VIX closed at 9.19 this evening. I'm pretty sure that is an all time low on the close. Is this the new normal for the level of volatility as it has been low for a protracted period now?

F1 to F2 contango is 15.24% which is pretty high. SVXY is on a roll at the moment at an all time high.

Of course that could all change in an instant tomorrow.

langley59 wrote:VIX closed at 9.19 this evening. I'm pretty sure that is an all time low on the close. Is this the new normal for the level of volatility as it has been low for a protracted period now?

Of course that could all change in an instant tomorrow.

Too right. "Only when the tide goes out do you discover who's been swimming naked." [Buffett]

I've entered a backspread for December expiry, net credit. These are supposed to payoff bigly(*) on sharp move from a low level of volatility - we'll see.

(*)yes that's a word now all options traders have been lacking, thankyou President Trump!

6 days on the trot with the VIX closing below 10 is really unusual. I am not going to bet against it staying low though. Done that before and either lost money or made very little. As a diversion, with 75% of my margin, I did make a 3% tax free return over the last 6 weeks on some Provident Financial bonds that the market took an irrational dislike to. The maturity payment arrived yesterday so I am ready to go with options again now should we see some fireworks. Non-farms this afternoon, which might be the catalyst we need.

Even oil has lacked interest. I am waiting for a drop in WTI below $50 before I go back into WTI puts.

langley59 wrote:VIX closed at 9.19 this evening. I'm pretty sure that is an all time low on the close.

Yes it was.

'A popular measure of Wall Street volatility finished at an all-time low Thursday, highlighting a protracted period of market calm as stocks continue an extended push into record territory. The CBOE Volatility Index VIX often referred to as the market’s fear gauge, closed at 9.19, which marks the lowest close for the indicator since Dec. 22, 1993, when it ended at 9.31. The indicator was created that same year.'
http://www.marketwatch.com/story/wall-s ... 2017-10-05

The article includes some wider/deeper analysis of VIX recently vs historically.

Now 7 days on the trot below 10. According to my stats that is the longest on record. Previous longest was 4 days back in December 1993.

A few hours after my posting about lack of volatility in oil WTI dropped 3% and implied vol jumped. Consequently I sold some DEC puts at 4400. Expiry is 15 November.

Well today has certainly been dramatic. Spot VIX closed at 37.32 up 115% on the day and the usual contango between the first and second month futures has reverted to an enormous backwardation of 15.8%. SVXY crashed 32% during market hours and is now down by 80% after hours, demonstrating the extreme movements this trade can have.

For my part I sold out of my long SVXY position some time ago getting concerned about the inexorable rise and then I regretted it as it continued to rise. Now may well be the time for the brave to load up again, especially as IG Index now offer extended hours trading in SVXY (9am to 1am).

Just my opinion of course, not a recommendation!

Some discussion on Seeking Alpha about XIV possibly being subject to a forced liquidation if it falls by more than 80% in a day, I have not researched this. SVXY may well be different and from reading the prospectus I think that only applies if there is no demand for the product. This is a risk to consider nonetheless.

Both SVXY and XIV are suspended at the moment on IG, not sure what that means, all I can find is speculation by traders rather than hard facts. Will await the Wall St open.

1nv35t wrote:At present high levels of volatility, short volatility going forward is a potential productive investment.

Not a one-way street though, by any means. VIX is ramping up again right now, after calming somewhat in the first couple of hours of European trading.


GS

XIV has announced that it is terminating its ETN:

https://heisenbergreport.com/2018/02/06 ... as-landed/

SVXY will carry on:

https://finance.yahoo.com/news/proshare ... 00592.html

svxy news is good, but so far svxy isn't trading at least on my screens, so not sure what is going on.

Regards,

The ProShares press release on SVXY indicates that they expect trading to restart today. I hope its soon as the vol futures have come right back down and I went long last night in the after hours trading.

langley59
The ProShares press release on SVXY indicates that they expect trading to restart today. I hope its soon as the vol futures have come right back down and I went long last night in the after hours trading.

Kind of interesting that it has not happened so far.

Suggests its the regulators who are delaying the return, but why and for how long ...?

Regards,

svxy now trading again at around 11 compared to last nights close of around 80.

Seems disproportionate compared to the Vix which closed yesterday at around 28 & is now 38.

Regards,

Now trading at about the level it closed at last night in the after hours.
The fact that it is still alive shows the benefit of the ETF over the ETN I suppose.

Langley57
Now trading at about the level it closed at last night in the after hours.
The fact that it is still alive shows the benefit of the ETF over the ETN I suppose.

Yes, it is a great blessing that it is still alive.

Wonder if it will get back to tracking the inverse vix or if it has been so shamed in the media that it must slowly perish.

The note from the provider is quite positive as to their belief it is still a valid instrument so one can at least hope.

The media articles that it was bust have been shown to be wrong which is also a plus.

Dunno, like to think in the by and by it will recover, but the current trading range leaves me concerned.

Regards,

Interesting article on how svxy works:

https://sixfigureinvesting.com/2016/08/ ... svxy-work/

Very convenient that it isn't valued till 4:15, allowing shorts to pound it in the after hours to give us the situation we now have.

It took circa 5 years for the SVXY to go from its current level to those holding just before the recent volatility.

A long time to hold underwater if history repeats.

Regards,