Archive for the ‘VIX & Volatility’ Category
VXX’s Brief Moment in the Sun
Random thought for the day… I (humbly) disagree with folks who poo-poo VXX (long 1-month VIX) as a bad investment. Let me rephrase that. I think it’s very worthwhile to educate investors about why buying VXX is usually a bad choice (read more), and why buying VXX for the long-term is always a bad choice, […]
Filed under: VIX & Volatility | 8 Comments
This is a follow up to a strategy presented by STS in Profit by Combining RSI and VIX, and originally proposed by Larry Connors in Short Term Trading Strategies that Work. The strategy applies the popular short-term indicator RSI(2) to the VIX index and uses the result to time the S&P 500. [logarithmically-scaled, growth of […]
Filed under: Trading Strategies, VIX & Volatility | 3 Comments
A reader asked an interesting question: what does the VIX futures term-structure (contango versus backwardation) say about future stock market returns? My off-the-cuff answer was that the VIX term-structure is only predictive for volatility ETFs like VXX or XIV (because of the impact of the underlying VIX futures converging to the VIX spot), and that […]
Filed under: VIX & Volatility | 6 Comments
Keeping with my theme from my last post, I’ll look at a common passive investment strategy, a 50/50% investment in SPY (S&P 500) and IEF (10-year UST), and replace the equity exposure with a (volatility-equivalent) investment in the volatility ETF XIV. First our baseline, a 50/50% investment in SPY/IEF rebalanced monthly (frictionless): [logarithmically-scaled, growth of […]
Filed under: Trading Strategies, VIX & Volatility | 20 Comments
A popular trade is to hedge long equities exposure with a long position in the volatility ETF VXX (or VXZ, etc.) I don’t like this play when VIX futures are contangoed, which they usually are (and are right now), because the futures term-structure is working against VXX a little bit each day like a dripping […]
Filed under: VIX & Volatility | 8 Comments
