XIV has only existed since November 2010, so we are dependent on simulations for guesses on its performance before that. The index that XIV is based on goes back into the 2005 time frame, so I have the data I need to backtest XIV for the 2008 crash. My simulations show a close match to actual XIV values (see this post) so I have …
With its 52% decline since July7th, XIV has shown again this is not an investment for weak stomachs. How long might it be before XIV surpasses its recent (and all time high) of 19.43? I looked at the last three significant corrections in the market—the Flash Crash, the Fukushima Crash, and the recent Cap Flash. As the starting point I used the recent high of …
In spite of its name, XIV is not the inverse of the VIX index—it is the daily percentage inverse of an index called SPVXSP, which you can monitor on Bloomberg here. This index very closely tracks the same index that VXX uses, SPVXSTR. Last week XIV did not track VXX’s daily moves particularly well. There has been a lot of speculation about what was causing …
This morning I put a credit spread in place, selling August VIX $15S calls and buying $47.5S calls for a net credit of $18.2. The underlying for these calls is the August volatility futures—not the VIX itself. The effective price of the underlying for these options was about $34 at the time. The VIX was around 42. Normally the shortest term volatility futures are cheaper …
As far as crashes go, this one has been pretty orderly. Volume continues to be heavy, which I see as one of the few encouraging sign. Ironically Treasuries are up—but lower than investment grade paper is getting hammered. Obviously the big fear is a recession—but without any real news, similar to the Japanese earthquake/tsunami/reactor meltdown correction. VIX is at 44 right now. …
