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Going short on VIX?

 
Friday, March 9th, 2012 | Vance Harwood
 
Unlike the S&P 500 or Dow Jones Index there is no way to directly invest in the VIX index.  I’m sure some really smart people have tried to figure out how to go long or short on this computed volatility index, but currently there’s just no way to do it directly.  Instead, you have to invest in a security that attempts to track VIX.  None of them do a great job of this.   I’ve given a short answer and a long answer below on how to best short the VIX given the current choices.  Take your pick.
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Short Answer
  • To go short on VIX buy XIV
    • XIV attempts the opposite percentage moves of VXX.  Since VXX only manages about 50% of the VIX’s percentage moves you should expect XIV to have a similar behavior.  For more on XIV see this post.

Long Answer

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Posted in Advanced Topics, all, Featured, Options, Popular Post, VIX | No Comments »

Trading in IRA accounts, and avoiding “free riding”

 
Saturday, February 25th, 2012 | Vance Harwood
 

As much as possible I try to trade in my IRA accounts—in order to defer taxes of course. It is a bit counter intuitive to be doing more speculative activities in a retirement account, but this approach supports my goals:

  • Achieving good returns
  • With reasonable risks
  • While compounding growth

If your money is in Roth accounts, all the better, but most people interested in trading in their IRAs are restricted to traditional IRAs.

There are restrictions on what trades you can do in an IRA account.  For example you can’t short a stock in an IRA account, but option restrictions have eased some over the years,  and market innovations like short ETFs (e.g., SH, SDS) have effectively bypassed some of the more onerous restrictions.    Brokers vary in what they allow in IRA accounts, so pays to ask around.   Fidelity for example allows me to do some types of equity option spreads, while Schwab does not.   Covered calls and protective puts on long positions are broadly available within IRAs.

For a more general treatment on trading in IRAs see this post.  The rest of this post will deal with free riding and how to avoid it.

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Posted in all, Covered Calls, dividend, Featured, Mainstream, Options, Popular Post | 11 Comments »

How to go long on the VIX index

 
Monday, March 12th, 2012 | Vance Harwood
 

For the average investor there are four ways to go long on VIX:

  1. Buy a leveraged exchange traded product (ETP) that tend to track the daily percentage moves of the VIX index.  At the moment there are three of these:  CVOL, UXVY, and TVIX (currently not recommended).
  2. Buy Barclays’ VXX (short term) or VXZ (medium term) Exchange Traded Note (ETN) or one of their competitors that have jumped into this market.   See volatility ticker for a full list of volatility ETN/ETFs.
  3. Buy VXX or VXZ call options  (recently ProShares VIXY and VIXM began offering options too)
  4. Buy VIX call options / short VIX put options

 

Posted in Advanced Topics, all, Featured, Options, Popular Post, VIX | 13 Comments »

Next SPY ex-dividend date

 
Monday, March 26th, 2012 | Vance Harwood
 

SPY went ex-dividend Friday March 16th, 2012.  The dividend was $0.6139 per share with a distribution date of April 30th.  Yes, SPDR takes their time distributing the $480 million in dividend money for this quarter.  The table below summarizes first quarter dividend information for SPY, IVV, and VOO—the three biggest S&P 500 index ETFs.

SYMBOL Next Ex-dividend Next Pay date Previous Dividend Dividend
SPY 15-Jun-2012 30-Apr-2012 $0.7701  $0.6139
IVV 26-Mar-2012 30-Mar-2012 $0.7701  $0.6323
VOO 26-Mar-2012 30-Mar-2012 $0.3430  $0.2850

 

You only have to buy a stock or ETF the day prior to its ex-dividend date to be eligible for the dividend.  You can sell on the ex-dividend date if you want and still collect the dividend when the distribution / pay date arrives.    Be aware that  in a flat market the stock or ETF at opening on its ex-dividend date will typically drop in value by the dividend amount.  See Top 10 questions if you have more questions on dividends.

For more information about ex-dividend and distribution dates for SPDR, iShares, Schwab, and Vanguard ETFs see this post.

See the chart below for SPY’s dividend history since 2004. Click on graph to enlarge.

 

SPY Dividend History

 

Interested in SPY dividend capture?

Looking for ex-dividend information for other ETFs?   Check this page.

An overview of Six Figure Investing

Contango ETFs

Dividend Capture

Dividends

General ETF information

Market Predictions
Volatility—General
Volatility—Short
Volatility—Underperforming/ Dead ETNs
Volatility ETNs—Under the Hood

Posted in all, dividend, ex-dividend, Featured, Mainstream, master | 3 Comments »

Vance’s rules for six figure investing

 
Thursday, December 15th, 2011 | Vance Harwood
 
  • Big moves usually don’t happen in a day, be patient
  • Don’t fight the market
  • Don’t jump in or out all at once
  • Markets tend to move in 3 day cycles, don’t jump the gun
  • Don’t buy at the daily high, at least wait for a retrace
  • What is the upside opportunity vs the down side risk?
  • Risk always goes up with increasing reward—the market is very efficient in that regard
  • You have to take a position on market/stock direction–that’s the hard part
  • Don’t try to pick the top, or the bottom—as Joe Kennedy said “Only a fool holds out for the top dollar”
  • The past does not predict the future—this is basis of technical analysis–it is a mirage.  Charts show psychology, not forces of nature.
  • The moves in the market are best understood as the ebb and flow of fear and greed
  • Markets will move—that much is certain
  • Resistance levels and trend lines are real—because others believe in them
  • Black Swans kill positions that are short volatility (e.g., covered calls)
  • If you have realized 80% or more of the available profit in a position, close it out.  You’ll hate yourself if you let that slip away.

Posted in all, Featured, Popular Post | No Comments »

Six Figure Investing—an Overview

 
Tuesday, March 20th, 2012 | Vance Harwood
 

The live action is over on the blog tab, but you might be interested in some of the posts I’ve written over the last two years.

Contango ETFs

Dividend Capture

Dividends

General ETF information

Market Predictions
Volatility—General
Volatility—Short
Volatility—Underperforming/ Dead ETNs
Volatility ETNs—Under the Hood

Posted in Advanced Topics, all, Featured, Options, VIX | No Comments »


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