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OptionsEnthusiast™

VIX discussion

By OptionsEnthusiast™, in General Board

205 posts in this topic

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted (edited)

2015.08.21 VIX in comparison to the VXV/VIX ration over the past year.

 

post-655-0-66133000-1440188308_thumb.png

 

Source:  IB

 

VIX closes @ 28.03

VXV/VIX ratio @ 0.84

 

Dow down 527 points 3.10%

SPX down 64 points 3.14%

COMP down 168 points 3.44%

RUT down 15.3 points 1.30%  ?

Edited by OptionsEnthusiast™

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted (edited)

Will globally-coordinated, plunge-protection-team and central bank build-up of self-organized criticality cause the largest financial collapse in the history of the world?

 

"Bak's Sandpile: Strategies for a Catastrophic World"

https://youtu.be/fGSwMC3qYuk

"Self-organized criticality is a kind of tension that builds up in complex systems that causes them to fail, and the more self-organized criticalilty there is, the bigger the crash, the bigger the failure. So, an example would be the 2008 financial meltdown that we just experienced a couple of years ago.  This is a classic example of the sandpile..."

 

"Bak's Sand Pile: Strategies for a Catastrophic World"

by Ted G. Lewis 

Link: http://amzn.com/098307450X

 

"Modern societies want to avert catastrophes, but the drive to make things faster, cheaper, and more efficient leads to self-organized criticality-the condition of systems on the verge of disaster. This is a double-edged sword. Everything from biological evolution to political revolution is driven by some collapse, calamity or crisis. To avoid annihilation but allow for progress, we must change the ways in which we understand the patterns and manage systems. Bak's Sand Pile explains how."

Edited by OptionsEnthusiast™

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted (edited)

What if the government accurately reported the correct GDP number for Q2 back in July?

 

September Rate Hike Back On Table: Q2 GDP Soars In Revision From 2.3% To 3.7% Driven By Record Inventory Build

 
picture-5.jpg
Submitted by Tyler Durden on 08/27/2015 08:43 -0400

 

http://www.zerohedge.com/news/2015-08-27/september-rate-hike-back-table-q2-gdp-soars-revision-23-37-driven-record-inventory-b

 

 

My guess is that the FED may state in its own words that "Everything is Awesome" and is "getting better" all the time.  The markets will strike higher on that meme.  However, the markets will then realize that everything is awesome and on schedule for the FED to begin tightening monetary policy starting in September.  At that point, the markets will turn over as institutions will sell into the ramp because the markets are forward looking.  Institutions will continue to take long-term profits and increase their cash positions.  Central banks will attempt to mitigate the effects of their tightening stance by purchasing eMini futures today and overnight.  Central bank intervention is distorting the true impacts of its change in policy.  The real action will likely be seen in the bond markets especially at the long end of the yield curve.

 

On Thursday, annualized GDP may show some slowing, but will still come in around 3% which will support the FED meme from Wednesday and the markets will continue to sell off because it will be interpreted as the last chance to get out before the ramp up in interest rates.

 

In retrospect, it would have been best to take gains in VIX positions Monday morning.  Wait for the central bank intervention to ramp-up the equity markets today to begin averaging back into VIX positions.  VIX is back down in the mid-13s and the VXX is back down in the mid-16s.  

 

Overnight, central bank intervention in the eMini markets may reduce volatility even more.  This may allow you to enter at even better prices tomorrow morning before the FOMC announcement at 2PM EDT tomorrow afternoon when volatility is likely to spike again barring continued and extreme central banking intervention to mitigate volatility associated with its change in policy.  

 

However, the bond markets are likely to see the biggest pullback especially at the long end of the curve.  TBT is currently around $46/share and TLT is currently around $121.50/share.

 

Everything Is AWESOME!!! -- The LEGO® Movie 

 

The Beatles - Getting Better

Edited by OptionsEnthusiast™

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Marco    223

Marco
Posted

Hey OptionsEnthusiast can't help a few remarks

1) if you read too much ZeroHedge you want to be always long VIX (which in the long run is not a good trade) so while I DO LOVE them one must take into account that they are always bearish on everything

2) you are the first one I see using a VXV/VIX ratio. I think Bill Luby is generally credited with making that ratio popular and he (and everyone else I see using it) uses VIX/VXV ratio. Don't let that stop you to invert it - just saying

3) the ratio (which ever way around you use it) is not so much used a to predict where the VIX will go (you putting it in with VIX in the same graph makes me believe that's how you look at it) but more as a timing indicator for trading VIX based ETPs (like XIV and VXX) the ratio is a simple measure of contango/backwardation and the idea is that you are long XIV and the likes if the term structure is in contango and go to cash or even long VXX if it's in backwardation. If the ratio indicates contango XIV enjoys a tailwind from the positive roll yield (strictly speaking you need to look whether the 2 front month FUTURES are in contango rather than the spot indices but they are easier to track and most of the time will show the same result as the futures) but that doesn't necessarily mean that VIX spot will go down

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted (edited)

Thank you for your feedback Marco!

I recently started researching all VIX hedging strategies and trades.  It is time that a new VIX group is formed to compile all VIX knowledge into one forum.

In addition to SteadyOptions, I just joined http://vixcontango.com/and http://www.tradingvolatility.net/p/home_3.html?m=1 in an effort to expand my knowledge of VIX hedging and trading strategies. I also frequent vixcentral.com

Your continued feedback is much appreciated.

:)

Edited by OptionsEnthusiast™

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted (edited)

Reminder:  Three weeks from tomorrow weekly VIX options will be introduced.

"CBOE to List VIX 'Weeklys' Options Beginning October 8"

 

July 31, 2015

 

CHICAGO, IL – July 31, 2015 – The Chicago Board Options Exchange® (CBOE®) today announced that it plans to list options with weekly expirations on the CBOE Volatility Index® (VIX® Index) beginning Thursday, October 8, 2015.

 

The listing of VIX Weeklys options adds another tool to an array of long- and short-term trading strategies that can be executed on the VIX Index, the world’s premier benchmark of equity market volatility. The launch of VIX Weeklys options follows that of VIX Weeklys futures, which were introduced at the CBOE Futures Exchange (CFE®) on July 23.

 

“We received strong interest from our customers in short-term VIX trading, and the initial response to VIX Weeklys futures has been positive. We look forward to building on that favorable response with the upcoming launch of VIX Weeklys options,” said CBOE Holdings CEO Edward T. Tilly. “VIX Weeklys are a natural extension and complement to standard VIX options and futures and provide investors with additional opportunities to trade the world’s most widely followed measure of market volatility.”

 

The VIX Index is based on real-time prices of options on the S&P 500® Index (SPX) and is designed to reflect investors' consensus expectations for 30-day stock market volatility. Standard VIX futures and options expire monthly. Weekly VIX options expirations will offer convergence to the VIX cash index four to five times per month, instead of once a month. 

 

The closer VIX options get to expiration, the more they tend to track the underlying VIX Index. Contracts with weekly expirations allow investors to implement more targeted buying, selling, spreading and hedging strategies. In general, Weeklys are growing in popularity industrywide because they offer investors the ability to fine-tune their positions.

 

CBOE may list up to six consecutive weekly expirations for VIX options and futures.

 

New weekly expirations for VIX futures and options are listed on Thursdays (excluding holidays) and expire on Wednesdays. Like VIX Weeklys futures, the VIX

Weeklys options will be available during regular and extended trading hours. For more information on VIX Weeklys futures and options, go towww.cboe.com/VIXWeeklys/. 

 

Forward-Looking Statements:
Certain information contained in this news release may constitute forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made and are subject to a number of risks and uncertainties.

 

About CBOE:
CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education. CBOE Holdings offers equity, index and ETP options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options and futures on the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE include equity options, security index options, Weeklys options, LEAPS options, FLEX options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE Holdings is home to the world-renowned Options Institute and www.cboe.com, the go-to place for options and volatility trading resources.

 

Media Contacts:  

Analyst Contact:

Suzanne Cosgrove Gary Compton Debbie Koopman (312) 786-7123 (312) 786-7612 (312) 786-7136 cosgrove@cboe.com comptong@cboe.com koopman@cboe.com

 

CBOE-OE

 

CBOE®, Chicago Board Options Exchange®, CFE®, Execute Success®, FLEX®, LEAPS®, CBOE Volatility Index® and VIX® are registered trademarks, and BuyWriteSM, BXMSM, CBOE Futures ExchangeSM, The Options InstituteSM and WeeklysSM are service marks of Chicago Board Options Exchange, Incorporated (CBOE). Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard & Poor's Financial Services, LLC and have been licensed for use by CBOE and CFE. All other trademarks and service marks are the property of their respective owners.

 

http://ir.cboe.com/press-releases/2015/31-07-2015a.aspx

 

Edited by OptionsEnthusiast™

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OptionsEnthusiast™    15

OptionsEnthusiast™
Posted

I'd be interested on any feedback you have from the trading volatility site.

Trading Volatility is all about managing VIX ETFs such as the XIV and the VXX during periods of contango and backwardation. Options are not covered, but the principles and bias indicators could be applied to options strategies.

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Edwin    63

Edwin
Posted

Trading Volatility is all about managing VIX ETFs such as the XIV and the VXX during periods of contango and backwardation. Options are not covered, but the principles and bias indicators could be applied to options strategies.

I should have clarified my question.  Sorry about that, it was written from my phone.

I was more specifically asking how the indicators on Trading Volatility compare to the indicators on VixContango, which I have been following.  I'm able to chart and track the VRatio and Contango in TOS on my own without the site.  I wonder how the VCO and VTRO indicators compare to VRP on Trading Volatility, and if there other valuable indicators for going long XIV or VXX.  Thanks

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Marco    223

Marco
Posted

Thank you for your feedback Marco!

I recently started researching all VIX hedging strategies and trades.  It is time that a new VIX group is formed to compile all VIX knowledge into one forum.

In addition to SteadyOptions, I just joined http://vixcontango.com/and http://www.tradingvolatility.net/p/home_3.html?m=1 in an effort to expand my knowledge of VIX hedging and trading strategies. I also frequent vixcentral.com

Your continued feedback is much appreciated. :)

There are plenty of people in the VIX ETP space.

The vixcontango guy is quite active on Twitter and has a website with plenty of charts and info

http://volatilitymadesimple.com sells their own XIV/VXX trading strategy but more interestingly he writes extensively about other strategies in the space. here for details on how they work http://volatilitymadesimple.com/category/strategy-backtests/ he also post a monthly summary about how they all did.

http://vixandmore.blogspot.co.uk/ has years of wisdom on its page but it's all accumulated in his blog over the years and maybe is not in the most accessible format. if you are new to the topic maybe start here http://vixandmore.blogspot.co.uk/search/label/educational

I also like http://sixfigureinvesting.com/blog/ - very educational

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Edwin    63

Edwin
Posted

There are plenty of people in the VIX ETP space.

The vixcontango guy is quite active on Twitter and has a website with plenty of charts and info

http://volatilitymadesimple.com sells their own XIV/VXX trading strategy but more interestingly he writes extensively about other strategies in the space. here for details on how they work http://volatilitymadesimple.com/category/strategy-backtests/ he also post a monthly summary about how they all did.

http://vixandmore.blogspot.co.uk/ has years of wisdom on its page but it's all accumulated in his blog over the years and maybe is not in the most accessible format. if you are new to the topic maybe start here http://vixandmore.blogspot.co.uk/search/label/educational

I also like http://sixfigureinvesting.com/blog/ - very educational

Marco, have you tried subscribing to these sites?  If so, do you have feedback on how well their indicators work and their service?

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Edwin    63

Edwin
Posted

These can be tough trades on vol products, overnight markets can totally go against you either way.  You might think you would have been safe buying XIV or SVXY yesterday with the strong close, and then you're down quite a bit this morning.  And then the opposite can happen if you're long VXX and the pre-market is up 1-2%.

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erikp    1

erikp
Posted

I'm a Volatility Made Simple subscriber. It is really kind of funny how different strategies signal at the same time long/short/cash. You really have to stick to one strategy, no matter what you think. Only this way you make money on the long run. ATM I'm just observing things. Every day different strategies show mixed sgnals so you don't really know what to do unless you just blindly follow the selected strategy signal and turn off your emotions. This means you need to be aware to have multi-month loosing trades, down to 50% more or less I guess, depends on the strategy. On the long run, all strategies show big profits, but this is in theory - for the robot traders, not humans lol

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Marco    223

Marco
Posted

Marco, have you tried subscribing to these sites?  If so, do you have feedback on how well their indicators work and their service?

No, not a subscriber to any of these. I have my own VXX/XIV trading model which is a blend of two of the strategies that volatilitymadesimple writes about. They are all based on the same 2 principles (or a blend of them) they either look at whether the VIX future curve is in contango or not and whether realised vol is above or below implied (VIX or VIX future) there are various methods and all work better or worse depending on market conditions. The other factor is how quickly the strategies get you out of short vol into long vol positions. If they are quick they suffer from many wrong signals but if a massive move comes like we had recently they save you most of the loss and make a ton of money by being long early. So there is a trade off and you have to find a happy medium.

All of these strategies are quite risky and suffer big drawdowns do be careful with allocation. They also all made fantastic returns historically but I have a feeling that the golden period of the last 5 years is coming to an end and we'll see more volatility again and a less steep contango so it will be harder to get to the returns of the past. Also this is a very popular and therefore crowded trade which leads to big risk off crashes where volatility explodes. The big jump in VIX we had in the recent sell off which was just a 10% correction (albeit a very fast one) is attributed by some to the rise in volume in these VIX ETPs.

  • Upvote 2

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Optrader    128

Optrader
Posted

VIX term structure seems to in be in contango now with Oct at 19 , nov at 20 and dec at 21.

Is it true ? Interestingly this happened even before XIV recovery.

This is not a good sign ? I was expecting XIV to fully recover. But looks like its slow crawl up now as VIX  has got back to 18's

 

Now if VIX jumps to 30-40,  XIV goes down 50% from here ? Is this true ?

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luxmon    233

luxmon
Posted

According to my platform, the VIX oct future was down 5.5% today while XIV was up 5.5%.  Do you expect different leverage than that on a day to day basis from that product?

 

VIX term structure seems to in be in contango now with Oct at 19 , nov at 20 and dec at 21.

Is it true ? Interestingly this happened even before XIV recovery.

This is not a good sign ? I was expecting XIV to fully recover. But looks like its slow crawl up now as VIX  has got back to 18's

 

Now if VIX jumps to 30-40,  XIV goes down 50% from here ? Is this true ?

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Optrader    128

Optrader
Posted

Not sure about correlation with oct vix futures

I am only looking at VIX which is now around 19

We now sold vix call calendar as vix has come down a lot

With my xiv trade i dont see huge up move

Just after fed announcement xiv had soared another 10% which seems missing today

What i am concerned is if vix moves to 30

Will xiv move another 50% down from here ?

I dont want risk holding it

I thought long term picture should be rosy :)

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Edwin    63

Edwin
Posted

XIV pricing will be dependent on the VIX term structure, not based on spot VIX.  I don't believe there's going to be a way to accurately approximate where XIV would be trading if VIX was back to 30.  9/2 was the last time VIX was at 30, and XIV was trading between 23-24.

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Optrader    128

Optrader
Posted

XIV climb back seems slower. It has picked up steam, but I was looking to back to 50's when VIX has already dropped to 16's and SPY has rallied back.

Something missing here Or is this normal ? 

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Marco    223

Marco
Posted

XIV climb back seems slower. It has picked up steam, but I was looking to back to 50's when VIX has already dropped to 16's and SPY has rallied back.

Something missing here Or is this normal ? 

1) while SPX has recovered quite a bit its still far off the highs and VIX is far off the lows. Also because realised Vol is still quite a bit higher especially if you look at intraday vol and not just close to cloe (which has come down quite a bit)

2) VIX futures spend quite some time in backwardation. For every day that is the case XIV loses value 

3) XIV also loses in value when it swings around violently so all these +/- 10 or 15% days we had recently made the ETN lose value (it leverages more when it goes up so suffers from a subsequent slump and it deleverages after a losing day so profits less from a massive rally the next day.

 

So for reasons 2 and 3 XIV probably wont be back at the highs even if SPX goes back to the highs quickly and spot VIX reaches the levels it had when XIV was over 50. 

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Optrader    128

Optrader
Posted

Thanks Marco. 

This is interesting ETN.  When market vol is dead, this one makes a climb and when market shivers, it takes a dive.

Can be used for volatility hedging.  

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tnTrader    2

tnTrader
Posted

I've been spending a good bit of time with the VIX market recently, focusing on the term structure of both the futures and the various VIX indexes.  The chart of the futures market as of this afternoon is shown below (courtesy of vixcentral.com).  The common pattern is either a rather consistent trend up or down as you go out in time.  This chart drops for a few weeks, rises going into next month's expiration and then the usual pattern of drops (given the current elevated VIX).  I've traded futures for years, but am new to VIX.  Any explanations of this would be appreciated.  Thanks.

 

post-2642-0-16511900-1453754208_thumb.pn

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Edwin    63

Edwin
Posted

I've been spending a good bit of time with the VIX market recently, focusing on the term structure of both the futures and the various VIX indexes.  The chart of the futures market as of this afternoon is shown below (courtesy of vixcentral.com).  The common pattern is either a rather consistent trend up or down as you go out in time.  This chart drops for a few weeks, rises going into next month's expiration and then the usual pattern of drops (given the current elevated VIX).  I've traded futures for years, but am new to VIX.  Any explanations of this would be appreciated.  Thanks.

 

attachicon.gifVIX term 2016-01-25.PNG

It's possible that there's a spike up for the expiration for 2/23 is because the Feb Fed meeting is captured in that expiration that is on 2/17.

 

http://mam.econoday.com/byweek.asp?day=18&month=2&year=2016&cust=mam&lid=0 

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