Computing the leverage of CVOL compared to the VIX index

Any strategy that hopes to offset down days in the market with volatility products that go up on those same days needs to figure out how much leverage the volatility product provides.   A little calculation produced the equation below for computing the expected price of Citigroup’s CVOL from the VIX index quote: (VIX – 10) * 9.6 = CVOL So if the VIX jumps …

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Will CVOL become the next VXX?

When Barclays ‘ VXX ETN first came out early last year I was pretty excited.   Having an direct investment in a volatility product that didn’t have the time decay (theta) of VIX options was attractive.   However, it turns out that price erosion on VXX is a huge issue—anyone that holds on for the long term becomes a loser.    In spite of this, …

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