Assumes working knowledge of options and a willingness to learn about new things — like volatility
Put a condor in place on S&P 500 April futures. The call spread was at S1350 (sell-to-0pen) and S1370 (buy), while the put spread was at S1140 (sell-to-open) and S1100(buy). The net credit on each set of four options before commissions was 6.15 points. With S&P 500 futures each point is worth $250, on the futures as well as the options on the futures. With …
The histogram below shows the daily percentage moves of VXX for 2010. If you plot this distribution for a normal stock or ETF you will get a normal looking distribution, with an average close to zero. This distribution (the red line marks zero), is asymmetrical (fat tail on the positive side), with an overall average of minus 0.43%. In contrast, the average of VIX’s …
I have been investigating VelocityShare’s XIV inverse volatility ETN, and I’m very impressed. I’ve backtested it through the beginning of 2010 and I’m getting some very attractive numbers—150% gain for the year. At the worst of the Flash Crash it would have gone down around 20% YTD, which is better than I would have expected. This looks like the first volatility ETN/ETF that …
Update. Barclays’ responded to the problems noted below with their IVOP ETN. It has now has a similar situation that XXV has—near its max price and very low leverage. See this post for more information. ************************************************************* Originally Posted December 11, 2011 Question: What would the value of Barclays’ inverse volatility XXV ETN be if Barclays’ volatility VXX ETN goes to zero? Answer $40 / share …
January 4th ProShares plans to offer two new volatility products: VIXY ProShares VIX Short-Term Futures ETF— a VXX clone VIXM ProShares VIX Mid-Term Futures ETF—a VXZ clone This Morningstar article provides more information. Right now I don’t see much that these new funds have to recommend themselves over the 13 funds that preceded them. Their liquidity and spreads will be poor at first, and …
