Is Shorting UVXY, TVIX, or VXX the Perfect Trade?

The charts for long volatility Exchange Traded Products (ETP) like Barclays’s VXX, VelocityShares’ 2X leverage TVIX, and PowerShares’ 1.5X levered UVXY are astonishing.

vxx-uvxy

I’m not aware of any other widely available securities that have declined like these.

Two questions come to mind:

  1. Why would anyone invest in these perennial losers?
  2. Why doesn’t everyone on the planet short these funds?

It turns out that there are reasonable reasons to buy these funds, and some people make money doing it. And a lot of people short these funds; it’s a crowded trade—to the point where it’s sometimes not possible to borrow the shares to short them.

It’s not easy money either way.

Read moreIs Shorting UVXY, TVIX, or VXX the Perfect Trade?

How to short VXX—the hard way and the easy way

Easy way: If you want to short VXX the simplest way is to buy SVXY.  This Exchange Traded Funds tracks -0.5X  the daily percentage moves of VXX so it isn’t a true short, but it has the same goal—going up when VXX goes down.  They carry annual investment fees (SVXY’s is 0.95%), which I doubt is an issue for you if you’re thinking of shorting …

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Going short on VIX?

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 there’s just no way to do it directly.  Instead, you have to invest in a security that attempts to track VIX.  None of …

Read moreGoing short on VIX?