From August 2nd to October 3rd, 2011 Barclays’ S&P 500 VIX Short Term Futures ETN (VXX) had a great 137% runup. In that same period ProShares’ UVXY, 2X leveraged Exchange Traded Fund (ETF) went up an astonishing 348%, 73 percent more than its 2X leverage factor would project. How is that possible? Don’t inverse and leveraged funds always underperform the index they’re tracking? Normal market …
Nearly four years ago Barclays introduced VXX, the first volatility Exchange Traded Product (ETP). Since that time 5 other companies in addition to Barclays have entered the volatility business. All together they have introduced 35 volatility funds. It hasn’t been pretty. Of those 35 funds, 15 have been discontinued/terminated and almost half of the remaining 19 are either below critical mass with less than $10 million in …
Update This article was first posted in September 2012. The strategy outlined below worked well until August 2013 and then basically went sideways for over 3 years before perking up again in 2017—when virtually any short volatility strategy worked. I’ve updated the chart and the verbiage to reflect those changes. In September 2017 the Cboe renamed its VXV index as VIX3M. The Cboe does not …
This post was 1st published August, 2012. In addition to the well-known VIX index, the CBOE also publishes the VXV index. It’s computed just like VIX, except that it gauges the implied volatility of SPX options 3 months out, rather than just one month. The chart below shows the 10-year history of these two indexes. < Recently I posted on how the medium term time structure …
Recently I finished reading a book on options that doesn’t explain the basics of calls and puts. The Greeks are on almost every page, but never defined, and it’s assumed that the reader already knows options strategies and acronyms (e.g., butterflies, condors, ratio spreads, ATM, OTM). Clearly the “The Option Trader’s Hedge Fund” is not for beginners. It targets serious traders that know the basics and …
