As you guys and gals might be aware there were 16 new VIX-based ETFs/ETNs introduced by different sponsors in the last couple of months. Leveraged, inversed, short term, mid term - your choice. XVIX (by UBS) is a different animal - it is a pair trade on the VIX term structure. It is long VXZ - mid-term VIX futures and short 0.5 VXX - short term VIX futures. One can argue that it is just human nature to overprice short term volatility and the mid/long term is priced right.
UBS backtested it five years - 24%, stable, market-independent returns
Now I am not suggesting even for a second you should invest in it. But it might be a good idea to check it out - http://www.ibb.ubs.com/mc/etracs_US/vix_longshort.shtml There are several blogs on the subject as well, just Google it
Disclosure - kicking the tires, no position
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XVIX ETN
Been watching the chart since your first thread - http://www.google.com/finance?q=NYSE:XVIX+NYSE:VXX+NYSE:VXZ+
Logic says there is limited downside, unlimited upside, where it's short VXX - which is all but guaranteed to decay.
Common sense says there's gotta be a catch.
Logic says there is limited downside, unlimited upside, where it's short VXX - which is all but guaranteed to decay.
Common sense says there's gotta be a catch.
So is XVIX basically a contango/backwardation indicator for VIX futures?
incy - sorry for the double post. I totally forgot I did a post and Otter gave me a link. Must be the age ....
NYSE - this is one of the questions I am trying to understand. Last year VIX was in contango and the ETN had a spectacular return - 55%. If it is that deterministic, it is easy to follow the term structure of VIX, get out in backwardation and buy in in contango periods
NYSE - this is one of the questions I am trying to understand. Last year VIX was in contango and the ETN had a spectacular return - 55%. If it is that deterministic, it is easy to follow the term structure of VIX, get out in backwardation and buy in in contango periods
Like I said, I would watch this one.
For the ten weeks or so that it's been trading I comparing a Google chart for VXX, VXZ and XVIX - http://www.google.com/finance?q=NYSE:VXX+NYSE:VXZ+NYSE:XVIX+NYSE:XIV, it looks like this doesn't take a rocket scientist to understand.
Knowing the ETN contains a 1 VXX short to 2 VXZ long ratio, it should be easy to track by placing all three on a chart, dividing the inverted gain/loss for VXX by two over any given time and adding the gain/loss of VXZ to track XVIX to observe any decay or deviation..
I like Google charts for this reason, the chart will display actual percentages for all positions at any point on the chart by positioning your mouse.
Simply move the mouse to any point, divide the VXX value by 2, invert that number as a gain to loss or vice versa and add the full VXZ value.
For the last ten weeks it's very tight, no discernible decay in XVIX relative to the underlying positions, it's tracking the underlying VIX components accurately within fractions of a percent.
As of right now, XVIX is down 10%, when you expand the chart to the full period VXX/VXZ have been trading, according to this 2 to 1 ratio XVIX is about as low as it "should" go in what appears to be a relatively range bound valuation, a swing traders wet dream.
My only concern, if VXX and VXZ are just now beginning some type of anomalous spread that hasn't been exhibited over the last two years they've been trading.
I'm tentatively considering an entry, just a small one, for the fact that this may be near as low as this ETN gets.
For the ten weeks or so that it's been trading I comparing a Google chart for VXX, VXZ and XVIX - http://www.google.com/finance?q=NYSE:VXX+NYSE:VXZ+NYSE:XVIX+NYSE:XIV, it looks like this doesn't take a rocket scientist to understand.
Knowing the ETN contains a 1 VXX short to 2 VXZ long ratio, it should be easy to track by placing all three on a chart, dividing the inverted gain/loss for VXX by two over any given time and adding the gain/loss of VXZ to track XVIX to observe any decay or deviation..
I like Google charts for this reason, the chart will display actual percentages for all positions at any point on the chart by positioning your mouse.
Simply move the mouse to any point, divide the VXX value by 2, invert that number as a gain to loss or vice versa and add the full VXZ value.
For the last ten weeks it's very tight, no discernible decay in XVIX relative to the underlying positions, it's tracking the underlying VIX components accurately within fractions of a percent.
As of right now, XVIX is down 10%, when you expand the chart to the full period VXX/VXZ have been trading, according to this 2 to 1 ratio XVIX is about as low as it "should" go in what appears to be a relatively range bound valuation, a swing traders wet dream.
My only concern, if VXX and VXZ are just now beginning some type of anomalous spread that hasn't been exhibited over the last two years they've been trading.
I'm tentatively considering an entry, just a small one, for the fact that this may be near as low as this ETN gets.
Up 2.25% since I last posted, appreciation for this ETN is largely dependent on the decay in the spread between VXX and VXZ, which was unusually tight a couple of weeks ago.
i traded it last week for a few % in a day profit and felt like a genius. Looking at the current price the feeling is gone ... :-(
Oh, don't feel so bad.
I bought a small bit, as I said I would, to the extent that a sale right now wouldn't buy me lunch after fee's.
My intent is to hold for a long period, I suspect this instrument will very slowly bounce upward over time by capitalizing on the inverse decay & growing spread of VXX relative to VXZ.
If I'm wrong, no free lunch for me.
I bought a small bit, as I said I would, to the extent that a sale right now wouldn't buy me lunch after fee's.
My intent is to hold for a long period, I suspect this instrument will very slowly bounce upward over time by capitalizing on the inverse decay & growing spread of VXX relative to VXZ.
If I'm wrong, no free lunch for me.
that was my idea as well but i decided i should be able to time the entry. so I did - when the volatility jumped last week, VXX went up and XVIX being short went down. This was good but then I decided that there will be another chance and sold for a few %s. It was supposed to be an investment and I turned it to a trade
Well, so far this things cookin' with fuel, up 4% since 2/15.
If my interpretation of the underlying is correct, it should be able to regain it's original high and over longer periods of time, when it dips, each successive dips "should" be higher than the last.
Time will tell on that one.
I'm also observing an inverted version of VXX, ticker XIV, which could serve as a hedge for XVIX in ~extremely~ small dosages.
If my interpretation of the underlying is correct, it should be able to regain it's original high and over longer periods of time, when it dips, each successive dips "should" be higher than the last.
Time will tell on that one.
I'm also observing an inverted version of VXX, ticker XIV, which could serve as a hedge for XVIX in ~extremely~ small dosages.
incy - u r asking for trouble, just my opinion of course. I do have a small position in XVIX. It is a hedged instrument, why r u trying to hedge it again. It might work or it might not - one day when I understand how XVIX works i will render an opinion :-)
I'm talking less than 10% per capita to keep it interesting for short term trades judging by the extremes it moves relative to XVIX, but I was only thinking aloudincubus said: in ~extremely~ small dosages.
OK, if it just for fun to keep you occupied, I approve. If u r interested, here is one blogger on trading VIX with 10 day EMA/SMA crossover. VIX is not tradable but maybe VXX can be used - http://marketsci.wordpress.com/2011/03/01/random-thoughts-re-trading-volatility-etfs-part-1/
Great article OF.
My thinking, where XVIX "seems" relatively low risk so far, you could compliment it with strategic purchases of very small amounts of XIV.
Coincidentally, today was a picture perfect example, where most VIX spikes cannot be forecast, the after-effects are almost always the same...the "end of days" scenario that spawned the sell-off usually dies off within a day or two.
Today was exemplary, it occurred to me that XIV was going to open low and most likely rebound within a few days.
Add to that, XVIX is now up almost 4% because of this months volatility, once the turbulence simmers, it will probably trade excruciatingly slowly upward until the next "end of days" scenario....XIV just spices things up in the time being, as long as you observe the comparative beta between the two, XIV moves at least 4X XVIX and it looks like it may also be subject to decay.
My thinking, where XVIX "seems" relatively low risk so far, you could compliment it with strategic purchases of very small amounts of XIV.
Coincidentally, today was a picture perfect example, where most VIX spikes cannot be forecast, the after-effects are almost always the same...the "end of days" scenario that spawned the sell-off usually dies off within a day or two.
Today was exemplary, it occurred to me that XIV was going to open low and most likely rebound within a few days.
Add to that, XVIX is now up almost 4% because of this months volatility, once the turbulence simmers, it will probably trade excruciatingly slowly upward until the next "end of days" scenario....XIV just spices things up in the time being, as long as you observe the comparative beta between the two, XIV moves at least 4X XVIX and it looks like it may also be subject to decay.
Well, looks like my ratio of 10 to 1 was a good call, maybe a little light..
Since XVIX's 4% high on Friday, it's given back almost the whole 4% gained since my purchase.
In the same time since Friday, XIV has returned 15%.
Since XVIX's 4% high on Friday, it's given back almost the whole 4% gained since my purchase.
In the same time since Friday, XIV has returned 15%.
interesting. I used the pullback yesterday to buy some more shares and thinking about placing a 24 GTC sell order on the new shares
So far my strategy is working stellar, I'm going to do what amounts to the same thing you're doing by scaling into more XVIX as well to maintain that approximate 10% ratio, if my suspicion is correct on the XIV correlation, I may be able to play this indefinitely.
This combination is an insanely good swing trading vehicle so far.
Up on XVIX by almost 2% since adding to it, with the added bonus that XIV has also meandered up at the same time.
Now's a good time to either start shaving XIV or adding some VXX (yeah, confusing), mindful that the VXX/XIV combo reveals decay over the several months they've been around, also I may stand corrected on the assumption of gradual upward movement of XVIX, it too seems to have some form of decay to the underlying.
I could be wrong on the observation of decay on XVIX, only time will tell.
Up on XVIX by almost 2% since adding to it, with the added bonus that XIV has also meandered up at the same time.
Now's a good time to either start shaving XIV or adding some VXX (yeah, confusing), mindful that the VXX/XIV combo reveals decay over the several months they've been around, also I may stand corrected on the assumption of gradual upward movement of XVIX, it too seems to have some form of decay to the underlying.
I could be wrong on the observation of decay on XVIX, only time will tell.
incy - it was my understanding u r long XVIX and long 1/10 VXX as a hedge. How is XIV coming in the combo?
OF, no, not long VXX, long XIV which is the short counterpart of VXX.
As for how well it worked, in a word - outstanding.- a picture tells a thousand words http://www.google.com/finance?q=xvix+xiv+
I'm just going to chalk this up to beginners luck in regard to my timing and guestimate on the hedging ratio of 10%, mindful, I'm not playing with big money here either, just testing the waters.
As of Friday morning,I only wanted to limit losses on my initial 4% gain on XVIX knowing the Japan earthquake boosted the VXZ portion of XVIX, I figured a 10% purchase of XIV would be enough to both enhance the VXX short and protect me from losses on the original 4% gain in XVIX.
Not only was 10% enough, but XIV has risen 24% since Friday while XVIX fell 3.5% at it's lowest this week, while my addition to XVIX yesterday has already gained almost 2%.
Weirdly enough, the fact that XIV performed so well tells me that what goes up can also come down, where XIV is trading at $135, I added three shares of VXX to every one of XIV to counterbalance any impending turmoil this coming week.
Lastly, the VXX/XIV additions are not intended as a long term position because a chart of XIV and VXX display that the two counter positions are subject to decay just like other leveraged instruments.
This whole "experiment" hinges on whether I continue to see XVIX lose value in decay relative to it's underlying VXZ/VXX combo.
As for how well it worked, in a word - outstanding.- a picture tells a thousand words http://www.google.com/finance?q=xvix+xiv+
I'm just going to chalk this up to beginners luck in regard to my timing and guestimate on the hedging ratio of 10%, mindful, I'm not playing with big money here either, just testing the waters.
As of Friday morning,I only wanted to limit losses on my initial 4% gain on XVIX knowing the Japan earthquake boosted the VXZ portion of XVIX, I figured a 10% purchase of XIV would be enough to both enhance the VXX short and protect me from losses on the original 4% gain in XVIX.
Not only was 10% enough, but XIV has risen 24% since Friday while XVIX fell 3.5% at it's lowest this week, while my addition to XVIX yesterday has already gained almost 2%.
Weirdly enough, the fact that XIV performed so well tells me that what goes up can also come down, where XIV is trading at $135, I added three shares of VXX to every one of XIV to counterbalance any impending turmoil this coming week.
Lastly, the VXX/XIV additions are not intended as a long term position because a chart of XIV and VXX display that the two counter positions are subject to decay just like other leveraged instruments.
This whole "experiment" hinges on whether I continue to see XVIX lose value in decay relative to it's underlying VXZ/VXX combo.
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