Major bear insurance for a XIV position

I have been loading up heavily in XIV during this correction.   I certainly haven’t been bored, watching big gains one day go away the next, but the contango associated with VXX is currently structural—so as long as that situation continues XIV, which is short contango, will be a long term winner. If this correction turns out to be more than the minor setbacks we’ve …

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Bullish moves…

On Monday I bought back into XIV at 138.87,  it doesn’t appear that the market will follow last Friday’s plunge.  Instead we are getting more of a snap-back like we had on the mini-correction starting January 19th. On Tuesday, bought SPY at 129.71 and sold-to-open S130 weekly calls expiring this Friday (4-Feb)  at $0.57 for a  net debit of 129.14. .

Volatility and Bond moves

VIX was touching / very close to the lower 2 sigma Bollinger band this morning, so I sold my  XIV position at 150.13.  Bought some IEF (Barclays 7-10  Treasuries) at 93.80  because it was near the low end of its current trading range, will go ex-dividend next week (1-Feb) with a dividend of around $0.24/share, and tends to go up if equities go down. Later …

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The reason VelocityShares’ XIV works…

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 …

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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 …

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