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Rock228
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I trade volatility ETPs (SVXY, XIV, UVXY), S&P 500 through SPY, UPRO, SPXU, and invest long term in Dividend Growth stocks with high dividend CAGR values. Individual stock picking is a waste of time to me unless the company pays out large and high growth dividends. Macro mixed with... More
  • Fridays Market Selloff - Armageddon Or Opportunity  147 comments
    Jan 26, 2014 9:18 PM | about stocks: SVXY, XIV, SPY

    Both?

    I have no idea which way we go from here. We just wait and see what the VIX signals tell us and take action from there. The farther we fall the more money we can make on the way back up using (NYSEARCA:SVXY).

    So what do we know? Since QE3 started when the Vratio (VXV/Spot VIX) is less than 1.00 at the close this has indicated the bottom for (SVXY).

    Vratio Accuracy QE3:

    DateVIXContangoVRatioSPYSPY Drw%XIVXIV Drw% 
    12/28/1221.79-1.79%1.00140.03-4.9%15.70-21.5%Nailed Bottom
             
    2/25/1318.99-0.85%0.94149.00-2.8%19.18-20.5%Nailed Bottom
             
    4/15/1317.27-0.30%0.99155.12-2.6%22.45-12.0%Wrong (Terror Attack)
             
    4/18/1317.561.74%1.00154.14-3.2%19.93-21.9%Nailed Bottom
             
    6/20/1320.49-1.02%0.99159.40-4.6%18.48-27.6%Nailed Bottom
             
    10/7/1319.41-0.76%0.98167.43-3.3%23.96-17.7%4% from Bottom

    So That Was the Bottom Right?

    No, well..Maybe. The Vratio does get it wrong when there are big market selloffs like in April-August 2010 and July-October 2011 but those were outside of a QE round. We also have some macro events happening Monday-Thursday of next week that can throw a monkey wrench into the best historical analysis.

    Monday - Caterpillar earnings = huge global growth and cap ex indicator

    Tuesday - Consumer Confidence, State of the union = you never know what job killing plan our leaders will come up with

    Wednesday - Fed meeting = will they taper more if we are +5% down?

    Thursday - GDP 4th Quarter and Jobless claims

    OTHER KEY INFO

    VIX closed at 18.14. Highest VIX close during QE3 is 20.49 June 20th 2013. Longest VIX stayed above 18 during QE3 is 5 days during that June 2013 6% stock market pullback. The VIX also spent 5 days lower than 18, teasing us and making us think the bottom was already hit.

    (NASDAQ:XIV) drawdown 11.4% 1/24/14.

    Max XIV drawdowns since Financial Crises = 2010 - 53%, 2011 - 73%.

    Max XIV drawdowns during QE3 = June 2013 - 22% SPY - (6%)

    Max SPY drawdown during QE = 8% November 2012 Presidential Election and 8% Feb 2010 Just Before QE1 ended.

    QE2 and QE3 STATS

    Highest VIX - 29.4 on 3/16/11

    Largest XIV drawdown - 30.1% on 3/16/11

    Longest Vratio stayed below 1.00 - 4 days during the March 2011 pullback. SPY down 6.21% on that one.

    We need to keep a close eye on this one to spot the real bottom as close as possible. There are many reasons to believe this selloff will be short lived - bonuses/new allocations happen around now, QE3 still massive, positive GDP growth, etc. The typical drawdown during QE3 has been about 22% on XIV. I just don't want to be all in SVXY and find out the 20% XIV drawdown ends up being a 60% XIV drawdown.

    FINAL THOUGHTS

    Don't forget about Debt ceiling Feb 7th with a default date set for late February. If GOP comes out looking for a fight on this one (i don't think they will) then we have yet another hurdle for the markets in February.

    Unless we snap back strongly next week January will be a down month. Forget what you hear or read about what happens when January is a down month. I have run the data for the last two boom bust cycles and the January indicator doesn't work better than a coin flip. What does work (and I ran the numbers myself) is what the Traders Almanac says about down January's. Misquoting Stephen Aniston:

    "If January ends up down, it precedes a Bear market, 10% correction or a flat year 100% of the time." Let that one sink in for a minute.

    2014 is going to be a very exciting year indeed!

    Disclosure: I am long SVXY.

    Additional disclosure: 25% Trade Account Long SVXY @ $63.07 and100% Cash in 401k

    Themes: Volatility Trading Stocks: SVXY, XIV, SPY
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Comments (147)
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  • VTH
    , contributor
    Comments (133) | Send Message
     
    Rock, nice, history always tell us the floor-ceiling, and have to keep it in mind. But little context can help as well, 2011 drawdown was because of europe macro event and 2013 drawdown was because of taper fear. To put things in perspective now, corporate earnings have proven from then, earnings 4th qtr isn't disappointing ( atleast positive trending) and deflationary fears have receded( bond market doesn't agree with it yet), hence i highly doubt we may have more than 1% pull back in S&P. But, i will wait to get into svxy until fed mtg 1.50pm to go another 25%. Will go rest 50% after the meeting.
    26 Jan 2014, 10:04 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    If we get more than 1% pull back, i am happy and will it.
    26 Jan 2014, 10:06 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    thanks Rock.
    Excellent and timely!

     

    This morning's actions seems +ve, albiet it is not 8am yet, and we have CAT/FOMC to come etc.
    AAPL tonight could have an impact?

     

    Are we now out of backwardation, and does that indicate further strengt in the SVXY case?

     

    thanks
    27 Jan 2014, 07:38 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    well, CAT just blew past analyst expectations....
    http://cnb.cx/1b0x4Lu

     

    The company posted fourth-quarter earnings of $1.54 per share, up from $1.46 a share in the year-earlier period.

     

    Revenue fell to $14.4 billion from $16.08 billion a year ago.

     

    Analysts had expected the company to report earnings of $1.28 a share on $13.64 billion in revenue
    27 Jan 2014, 07:40 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » CAT earnings look ok. Large buyback is positive for stock market. Things look good but it is early. My system is based on at the close values so have to wait until then. I will post 30 minutes before the close if the signals show buy more. Until then I wait and watch the show!
    27 Jan 2014, 07:43 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    Thanks Rock.
    27 Jan 2014, 08:11 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Rock, Are you smelling money or ????
    27 Jan 2014, 10:35 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    bit quiet in here! I bought more SVXY options earlier today when it was at $58, so I've averaged down, and there is a possibility I may, although having broken the rules, get out of jail free on this one. I will need to consider whether I sell out or wait through tomorrows announcement. At one point the bid price was zero....!
    27 Jan 2014, 02:43 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    I bought some June options- strike price of $70

     

    Good luck to all of us!!!
    27 Jan 2014, 03:01 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    RJL, why June, why not march. Understand Feb is bit risky
    27 Jan 2014, 06:22 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    VTH:

     

    I am not playing it for a swing trade but want to hold them for at least May (sell in May and go away phenonoman to watch for).

     

    If they had May options, I would have chosen them.

     

    The June options plus the premium is about 21.5% higher than the current price of SVXY when I made the purchase. I wanted to also have enough time to us to get out of the current situation, complete the debt ceiling and then let contango do its work.

     

    I could possibly see SVXY at $100 per share at this time, if we have an up market and contango gets back to average 8-10% per month.
    28 Jan 2014, 06:38 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    RJL, that makes sense. what price did you pay?
    28 Jan 2014, 06:47 AM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    $6.20
    28 Jan 2014, 06:52 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    RJL, thanks.
    28 Jan 2014, 08:19 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » ALL - Going to be 75% to 100% in SVXY by the close today. Contango positive, Vratio heading back to 1 and my other indicators are heading in the right direction.
    27 Jan 2014, 03:24 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » 80% SVXY @ $62.65. Going long S&P 500 at the close tomorrow in my 401k.
    27 Jan 2014, 04:22 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Rock, Awesome nailing yesterday evening as bottom. I told you, you are on the way to legendary. I was thinking of going in just before fed mtg, but bought 75% yesterday evening after your call and it proved "Green" already. Will go in rest of the 25% tomorrow.
    28 Jan 2014, 04:15 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Yes, it is also a good mean-reversion point for SP500 leveraged ETFs based on Connors' VIX signal. VIX hit 15 days high, close VIX<open VIX=>short term bear is exhausted=>reversion for SP500.
    27 Jan 2014, 03:46 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Called it too early, the closing VIX is >the opening VIX. Hopefully I would not get blown up.
    27 Jan 2014, 04:18 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Wind - Sounds complicated. I will stick to my red equals bad and black equals good signals ;-) We broke trend on the VIX data, my data points moved in the + direction compared to Fridays close. Asia is stable (right now) so let's see what happens tomorrow! So exciting :)
    27 Jan 2014, 08:00 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Yeah, this signal is not reliable, and would have gotten one too early in the past on these trades.
    27 Jan 2014, 08:26 PM Reply Like
  • Darrylb
    , contributor
    Comments (25) | Send Message
     
    Rock - thanks for posting your thoughts! It should be an interesting week in volatility.
    27 Jan 2014, 08:11 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Darrylb - No problem. People can take my advice for whatever they think it is worth. Tomorrow should be fun!
    27 Jan 2014, 11:18 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    thanks rock. I got in on your signal on a few shares, at $63.05, but quite a few Fri calls earlier when it was$58. I had gotent myself into a hole though, as you know, and might get out of jail free on these $67 calls, ave price 80 cents. we shall see,
    Fed meeting looms, but Aisa stable. looking good, better than AAPL today. AAPL will bring down nasdaq, will that impact VIX at all?
    28 Jan 2014, 03:19 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    James, you may probably do ok on those jan 31 calls, as we have two and half days after the meeting.
    28 Jan 2014, 08:21 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    thanks VHT. I averaged down yesterday.

     

    If today works out OK, I think $70 would not be too unreasonable before Friday, so, yes, I could go from a few k down, to a few k up.

     

    I like the sound of your June calls though. They are certainly less stressful!

     

    Good luck all today.
    28 Jan 2014, 09:16 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    James, true, longer dated calls and also well in the money is what i like. Its less profitable in terms of percentage, but certainly very less stressfull.
    28 Jan 2014, 09:26 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    Emotions, emotions. I panicked yesterday and sold half of my $SVXY at 7% loss at around $59.60. I think the method is sound, the numbers should work, but when it comes to execution, I am my own worst enemy. If one could just remove emotions from trading :)

     

    Now, it is a new day, for the other half I plan on seeing where it goes, letting contango do its thing, and the Fed is still a new play for me. Planning to buy some leading to the announcement.
    28 Jan 2014, 09:17 AM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
     
    Seppo - Monday was a tough day to hang in there. I was watching 1776 as the "fall into the abyss" level on the S&P. When we went through that level I thought we might be done. It's hard peeling off thousand dollar bills as fast as you can refresh the screen. Especially "while" panic selling is going on around you. Really, watching XIV/SVXY in real-time is not recommended. I've been watching for some serious free falls this month and it is scary as hell.

     

    I'm not convinced your move was 'wrong'. I have been thinking a lot about risk management with these instruments. Trying to figure out what a good stop-loss level would be. For example, if we set a 2% stop-loss - worrying about a 7% loss never would have happened (in the intraday - downside gaps are another story). Something to manage the downside while letting the upside run. The problem I had on Monday was every time I thought I should sell - I was also thinking it was a good level to buy some more. Which is what I ended up doing, but I "should" have bought some more (based on what happened today), or I shouldn't have bought more (based on dropping into oblivion - something that easily could have happened yesterday). The problem is second guessing after the fact.

     

    I made a spreadsheet today that shows possible drawdowns as well as possible gains based on my current trading account balance. The drawdowns at 5% and 10% were eye-opening for me. 20% - forget about it! Something to always keep in mind because these ETP's can free-fall that much or more before you have time to try to figure out what you should do. Monday was gut-wrenching - and I was only in 25% - and that balanced out with ZIV (ZIV is my risk management buddy - lower drawdowns - it sorts of meanders down while XIV free-falls - I think I'm the only fan of this slower ETP on here, but something to check out if you haven't before).

     

    I think the risk management side of this trade is perhaps the most important for our long-term well being. Something I will continue to think about and work on - especially if this is the year that volatility really comes back!
    28 Jan 2014, 10:57 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    Thanks Tortoise. I will look into ZIV.

     

    I cleared my head today, thought that things were stabilizing, VIX still high but coming down, so the game was on again, and I bought more $SVXY at around $62.70. Averaging down the cost of my remaining half from the day before.

     

    Anyways, @rock's articles and this community around @rock's articles is amazing. Thank you everyone for your contributions.
    28 Jan 2014, 11:18 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Seppo, in QE time, you don't need to sell at loss at all if you own svxy stocks. It always comes up. Options are different and depends on individual.
    28 Jan 2014, 09:30 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    And I know that :) That's my whole plan :)

     

    But when it came to executing, and seeing $SVXY going off the cliff, the fear over black swan or something took over. But I am learning....
    28 Jan 2014, 09:33 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Seppo - I trade SVXY purely on data. As little emotion as possible. If the signal says buy - i push buy. If the signal says buy 100%.....my finger shakes a little but I buy anyways. It is hard to break the buy high sell low cycle and it takes a lot of practice. The thing with SVXY trading is even if you mess up (as in buy to early and things go south) you can always buy more at the lower cost and more than make up for the early buy.
    I would love to be wrong and sell SVXY at a 10% loss next week and buy it back 30% lower. I don't mind a 10% loss and then a 50% gain. There is always another train if you wait long enough. :)
    29 Jan 2014, 12:09 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    yip, interesting arena to be in. Great crowd as well.
    So, DOW up lots, FED ahead, VIX down a good bit, but SVXY getting off to a slow start compared to the fall it had in the last 10 mns yesterday.
    I need to learn more patience...Can you post me some Seppo?
    28 Jan 2014, 09:42 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    here is a question for the clever SVXY wonks.

     

    After a period of backwardation, and return to contango, does SVXY have a material difference in the value of the options it is holding and then selling as part of it's daily business, that affects it's price in the near term?

     

    many thanks for any response
    28 Jan 2014, 10:23 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Should it be the VIX future instead of options? My guess is to look at the volume and the Open interest (like shares out standing) for the two front month VIX futures. We can check if the trading volume is mainly coming from those VIX ETF/ETNs if they really hold the VIX futures (it is a big question mark since we doubt VXX is fully hedged, in other words Barclays shorts VXX effectively).

     

    My simple guess is (from CBOE data base
    http://bit.ly/1gmNjKF):

     

    On 01/24 Front month VIX future volume was 178240 and the OI was 185085. The daily roll would require ~1/30 of the OI if every action is caused by the ETFs and ETNs. Apparently 185085/30=6169<<... And I think those ETFs and ETNs are not the major movers.

     

    My guess might be totally off though :-)
    28 Jan 2014, 10:44 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    Thanks windwine. I'm just rather aware that I could do with understanding the inderlying vehicle here better.
    For instance, the drop in SVXY price yesterday when the VIX rose .3 or so was as much as the rise today ( almost) when the VIX dropped by 8.5%. So there is a mismatch in outcome which i do not understand...yet
    28 Jan 2014, 11:12 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    You can check
    http://bit.ly/1k1zGhU

     

    for the details about how S&P constructs the indexes which VXX/SVXY are trying to duplicate.

     

    As I told Rock before I always check http://on.mktw.net/1k1... to see the "real" VXX movement so you are not confused by the movement of svxy. However, when you are placing trades Yahoo Finance is your friend unless you have a Bloomberg terminal.

     

    It is similar to the commodity future market about rolling contracts to maintain a long exposure to the underlying. Based on what I was taught at school about commodity trading, the returns on VXX can be viewed as combinations of certain calendar spread trading. In fact one guy from CBOE talked about calendar spread trading VIX future in his book "Trading vix derivatives". So if you can directly trade futures there are more opportunities than simply the SVXY/VXX ETPs.

     

    I am still learning the volatility market from a more practical perspective and hopefully the information above is not misleading:-)
    28 Jan 2014, 11:32 AM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    James & Windwine:

     

    A key thing to know is that the neta sset value of the fund sometimes deviates by a few percent than the closing price of the ETF (yahoo).

     

    You should take this into account when you do some trades.

     

    Attached is proshares information:

     

    http://bit.ly/MpQELM

     

    Also, if you click on daily holdings on this attachment, it will reflect the front months being held versus the cash. They always sell out the second month future and buy back the front month future (roll). The roll is actually closer to 1/22 because their are 22 trading days in a month.
    28 Jan 2014, 11:38 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    RJL windchime thanks.

     

    Some bedtime reading for later on, by which time I hope SVXY will have climbed back up again
    28 Jan 2014, 11:44 AM Reply Like
  • Darrylb
    , contributor
    Comments (25) | Send Message
     
    Jamesingram, VIX futures mature at 4 week or 5 week intervals. Feb is 4 weeks, but there is a holiday, so this is a 19 day cycle. Each day, 1/19th of March will be shorted and 1/19th of Feb. will be covered for SVXY and XIV. As I type this, VIX is still higher than Feb. and March futures. If VIX were to stay at this level, SVXY would probably lose money as the futures must match the spot at expiration, but the move is never linear. Futures trade until 4:15 and that is where the end of day IV (internal value) is calculated. This is why the closing value is different than the IV. I find that daily maintaining a spreadsheet of VIX, the 2 front month values, days into the expiration cycle, 10 day historical volatility and other data helps me to visualize what's happening under the hood of XIV/SVXY.
    28 Jan 2014, 01:22 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    @darrylb Excellent explanation! Thank you very much!
    28 Jan 2014, 01:57 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    Here is a calendar that you can use to see when the VIX expires every month and count how many days the roll is.

     

    http://bit.ly/LkLKyU
    28 Jan 2014, 02:02 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    Thanks Darrylb. would that qualify as backwardation then?

     

    Looking at the CBOE site, I have the wrong vechicle, I'm not sure. http://bit.ly/L6G1Mh

     

    here S&P volatility is at 15.22, and falling, feb faster than March ( 15.28,
    march faster than Apr 16.07etc.
    If I have the correct vehicle, then things are moving in the right way, no?
    28 Jan 2014, 02:03 PM Reply Like
  • Darrylb
    , contributor
    Comments (25) | Send Message
     
    James, yes this site has the correct data, but I don't see the spot VIX price. I use the cboe site, but the quotes are the same. Today's VIX close was 15.80 (down 1.62), Feb. futures settlement at 4:15 was 15.20 (down .90), but is lower in an afterhours session. They recently expanded the trading hours. March futures closed at 15.55 (down .70.) So everything is moving in the right direction and Rock was spot on with his buy signal. I believe the technical definition of contango is that the future price is greater than the spot price (regardless of the commodity.) By that definition, VIX is not yet in contango. What I was saying before is that if spot VIX did not move by expiration, the Feb.. futures would have to rise from 15.20 to 15.80 and March would probably rise too and that would tend to drive SVXY/XIV down. So at the moment, we are dependent on a drop in VIX to make money. To be precise, the actual VIX futures settlement occurs on Wednesday morning, Feb. 19th, but SVXY/VIX will be totally out on Tuesday, Feb. 18th's close. Hope this helps.
    28 Jan 2014, 05:53 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    Thanks Darry...I think an article from you would be great! Would you consider?
    28 Jan 2014, 06:52 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    No one is scared about the FOMC meeting?
    28 Jan 2014, 02:44 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » RVijay- 9 of 10 Fed meeting the VIX rolls over afterwords. It doesn't matter what they say, people just want to know the answer good or bad.

     

    The only time VIX really spiked last year was June meeting when Bernanke said the taper word and then kept talking and talking....spooked markets. No presser tomorrow, what's to spook markets? My bet is the VIX rolls over and shows its belly.
    28 Jan 2014, 05:35 PM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    Rock,
    Do you plan to buy more svxy just after the Fed announcement tomorrow? Also, I own some VXX puts with a 41% profit that expire 2/22. I'm thinking that I should sell them sometime after the vix rolls over tomorrow but before the debt ceiling deadline on 2/7. Do you agree?
    28 Jan 2014, 06:10 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    I'm sure I've got the CBOE vehicales wrong, or even the wrong way round in my post above. This would make a great article? Anyone up for it/ You'll have guaranteed readers!
    28 Jan 2014, 03:15 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    Rock:

     

    VRatio is now slightly higher than 1.

     

    What is the typical trading range of this ratio and what is the overall market (S & P 500) doing in these trading ranges?

     

    Thanks

     

    Ralph
    28 Jan 2014, 04:26 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » James and Ralph - James us this site for all things VIX. It updates real time. In the box next to 1 with the % shows contango or backwardation (-). http://vixcentral.com Or just look at the slope of the curve, if the front end is flat or pointing up...then its bad for SVXY = backwardation

     

    Ralph - Not sure on Vratio. When it is 1.00 or lower, that typically indicates a top on the VIX or close to a top. When Vratio goes under 1 (friday) and then goes back above 1 (today) that indicates strong SVXY buy signal and a stock market bottom.

     

    I use Vratio as a passive indicator for VIX tops, so I don't really track or care what it does any other time. I don't use Vratio to call bottoms in VIX. In general the Vratio tracks the market, as it goes up the market goes up and down the market goes down.
    28 Jan 2014, 06:01 PM Reply Like
  • Darrylb
    , contributor
    Comments (25) | Send Message
     
    You can create a chart of Vratio with stockcharts.com. Enter $VIX:$VXV as the symbol. Over the last year, it's mostly ranged from .80 to the occasional trip over 1.0, but went over 1.5 in 2011. What you are seeing is the ratio of 30 day volatility (VIX) to 3 month volatility (VXV.)
    28 Jan 2014, 06:23 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Vratio I use is VXV / VIX spot, not the other way around. To clarify my first post compared to Darrylb.
    28 Jan 2014, 07:39 PM Reply Like
  • Darrylb
    , contributor
    Comments (25) | Send Message
     
    Rock, sorry about the VXV/VIX confusion. Your Instablog has created quite the following with lots of useful interaction. Thank you!
    28 Jan 2014, 09:52 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » BTW - I am calling Noonish on Monday Jan 27th as the bottom in this market pullback.
    100% Long SVXY @ $63.03. Hope everyone made some money today. I am up 2% :)
    SVXY has 11% more to go higher to get back to the 52 week high. Lots of room to run.

     

    I just noticed this - Futures up on this news. Turkey jacked their interest rates up. Should calm emerging markets http://cnb.cx/1fuqFLz
    28 Jan 2014, 06:22 PM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
     
    Great work Rock! And congratulations on these excellent trades! I am not in the full 100% yet but had a fantastic gain today. I thought we might dip ahead of the fed announcement but the news from Turkey looks like we rally in the AM. The after-hours saw another pop in XIV today (on the Turkey news). I have some jitters about the market outlook, but will follow the trend whichever way it goes. I do hope noon Monday was the bottom of this market - I did pick up some of my XIV very near that bottom which was fun after the fact, but at the time I was wondering if we would spill down another $5 a share. "Armageddon or Opportunity" was certainly going through my mind at that moment. Thanks again and best of luck tomorrow everyone!
    28 Jan 2014, 08:01 PM Reply Like
  • aeovian
    , contributor
    Comments (8) | Send Message
     
    Maybe this is an unusual perspective, but for some reason I find it easier to buy when SVXY is falling than when it is on the way up. Maybe I'm gunshy from having bought the tops of several equities in the past (eg AAPL circa September 2012).

     

    Also, in a sideways (or volatile) market, I feel more comfortable selling put options since it seems like a win-win situation to me. Anyone else writing puts on SVXY (or VXX for that matter)?

     

    (80% Long SVXY @ $62.47)
    28 Jan 2014, 08:52 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » aeovian and tortoise - It took me almost 8 months of studying the VIX cycles and pouring through all the data before I was confident enough to push the button and go all in. 20% dry powder is usually very prudent, I just think this is a solid VIX top and reversal with lots more to go.

     

    Thanks Tortoise. I do like the feedback and have learned some good tidbits from you guys - lots in private messages as well. I wrote that article just to get all the facts on the table for everyone to see what I see and react as they see fit. If we break 15 on VIX it is smooth sailing from there down to the high 12's. 15 is a big pivot point that once we break lower it almost never jumps higher without staying lower for awhile and the very few times it jumps back up it is shallow jump (low 15's) and immediately falls back. A inverse dead cat bounce if you will. So watch for < 15 at the close tomorrow and we are Golden! :)
    28 Jan 2014, 10:50 PM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    That answers my question about my VXX puts. I think I'll hold them to expiration on 2/22. I bought them at the vix peak and I think a triple is a real possibility. Rock, thanks again for sharing your knowledge.
    28 Jan 2014, 11:39 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » William - I will post when I sell my SVXY. At that point I would lock in some of your options profit if you haven't already. I can't nail SVXY tops as good as bottoms but I do ok.
    Tortoise - Buy when there is blood in the streets :) Remember Caddy Shack? "Everyones buying? Then sell sell! Wait, now everyone selling..then buy buy!!"

     

    BTW - I am working on an article where I need all of your brains to help me figure something out. We have a diverse group and I know you guys will have something I haven't thought of. More to come.
    29 Jan 2014, 12:16 AM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
     
    Aeovian - I don't find that unusual - my inclination is to buy on the way down and I am loathe to buy into the rally because "I could have had it cheaper just a few minutes ago". This is exactly backwards of the most profitable trade much of the time - so I'm trying to correct this bias. Buy into strength, sell into weakness - this is the momo way and our volatility trades are about as momentum based as it gets.
    28 Jan 2014, 11:10 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Guys, whats going on, why futures are in red, and vix futures climbing as well.
    29 Jan 2014, 07:43 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    yip, the turkish rally failed, and this is pre fed meet jitters. we could have falling until 2pm, when hopefully we will have a turnaround?

     

    however, after such hopes last night....this is tense and stressful!
    29 Jan 2014, 07:51 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Does anyone have day chart of s&p on dec 18. May be we can draw parallel. Last time i heard bernanke speak very market friendly, but there is no press meet this time.
    29 Jan 2014, 08:45 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Hold on to your hats - It is Fed day! Wild ride in store.
    29 Jan 2014, 09:44 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    well, hey, my options are not worth much at the moment, so I'm holding.
    I'm hoping that after the 2pm announcement we see a reversal....?
    I was expecting some tension today, but hoped the big jump last night would follow though.

     

    interesting VIX has trimmed it's gains from the open.
    29 Jan 2014, 09:54 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Waiting for the VIX to drop below VXV. Helicopter Ben, you can do it!
    29 Jan 2014, 12:07 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    S&P is holding up pretty ok compared to morning pre-market futures scare.
    29 Jan 2014, 12:29 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Seems like everything is tanking to me. I wonder what happened?
    29 Jan 2014, 01:53 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Guys, whats the play here.
    29 Jan 2014, 02:06 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    Ok, my calls are worth zero. I'm sunk on this one.
    The Fed did exactly as expected, so why the tank?
    29 Jan 2014, 03:06 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    I am under water as well. I have March $60 calls, and underwater 30% now. Not feeling good. Am hoping to keep it to maturity. Any thoughts anyone.
    29 Jan 2014, 03:14 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    I would swap march calls for my idiotic Jan 31st purchases! No decision to be made for me as the bid price is zero
    29 Jan 2014, 03:15 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    I added more $SVXY at $59.49...
    29 Jan 2014, 03:38 PM Reply Like
  • aeovian
    , contributor
    Comments (8) | Send Message
     
    Ditto, at $59.09. Up this morning, but I don't see a clear trend yet.
    30 Jan 2014, 05:14 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    I am thinking market is oversold now. I would love to buy at this time, but family doesn't allow. I am hoping we will get some bounce from now to next week and break even on my trades and get out. Any thoughts guys?.
    29 Jan 2014, 03:38 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Silence in the thread when there is trouble...hope it bounces, but that is all I can say, hope....
    29 Jan 2014, 03:41 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    I am down ~10% YTD. I might cut half of the position tomorrow if VIX/VXV stays on >1. Feeling sorry for myself? Yes, but no need to feel devastated, a loss is a loss and that is what we have to embrace in this big casino. Meanwhile I am still "wishing" for a rebound :-)
    29 Jan 2014, 03:48 PM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    well...i second that wish! I lost the plot last Friday, and made rash purchases, 'doubling down' on Monday. So anything tomorrow and Fri would be better than nothing.
    29 Jan 2014, 05:38 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Sold 70% SVXY. False bottom, sell signals showed up again. Looking for next entry point and try it over again. Doh!

     

    False bottoms happen sometimes. The only thing you can do is sell and hope to average down later....that is the safest thing to do. Yeah you might not get back in at the price you sold but at least you limit the downside risk if you stay all in.

     

    Work got in my way so I couldn't post earlier. I hope all of you saw what Wind saw - Vratio below 1 = sell. Hopefully everyone will remember that for next time.

     

    Vratio < 1 when it is FIRST hit usually means the bottom is near so you take a 25% position then....then Vratio moved two days higher and finished above 1 yesterday - stronger buy. BUT then it went back to < 1 today = Strong Sell. Usually when a false bottom happens like that we have more room to fall and sometimes significantly more room to fall so it is prudent to sell a bunch if not all SVXY until the Vratio gets to 1 again. I hope that makes sense to everyone.

     

    Vratio below 1, above 1 and then below one usually means false bottom = sell. Usually means we have significantly more to fall in SVXY.

     

    System is not perfect but it is the best I have found. SVXY is a risky bet. There is always tomorrow.
    29 Jan 2014, 04:16 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    What about back in Oct 2013? Vratio went below 0 from 10/7-10/9, then above 1, then back below 1 on 10/15, but then SVXY recovered? Was this an outlier?
    29 Jan 2014, 04:38 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Actually, looking at your 2013 trades, I see you went into SVXY on 10/15 after this pattern. Would love to hear what you felt was different this time around.
    29 Jan 2014, 05:08 PM Reply Like
  • aeovian
    , contributor
    Comments (8) | Send Message
     
    Looking at the charts, now looks somewhat similar to April 15-18th 2013 to me. Can we expect a similar price movement pattern or will the "volatility" be too "unpredictable"?
    29 Jan 2014, 08:18 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    I guess there is no use speculating on the future - anything can happen. We just have to wait and see what pain tomorrow brings.
    29 Jan 2014, 09:27 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    http://bit.ly/1b6HOuZ
    29 Jan 2014, 09:30 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » RVijay - Government shutdown/debt ceiling. I waited to buy until I knew the GOP was going to sign the bill. Otherwise I would have done the same exact thing as now back in October. That was a pullback for no other reason that the GOP grandstanding so I knew as soon as they were ready to sign we would take off. Totally different scenario.
    29 Jan 2014, 09:46 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Aeovian - I have no predictive powers. I am like a person at a Stop light waiting for Red or Green.
    29 Jan 2014, 09:48 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Down 4.8% as of close on this trade. Plenty of time to make it up. The train hasn't left the station on this cycle yet.
    29 Jan 2014, 10:07 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Oh ok. Yeah I remember now. Good discretion on that one!
    29 Jan 2014, 11:24 PM Reply Like
  • jeezuz30
    , contributor
    Comments (379) | Send Message
     
    Rock, I'm in a similar boat as I've got some short positions on UVXY.

     

    Why would you rather sell your SVXY holding instead of averaging down if the price keeps dropping?

     

    Isn't this ETF all but guaranteed to rebound? Might have to stomach some volatility and drawdowns in the meantime though
    29 Jan 2014, 11:01 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    I prefer averaging down, since at least I do have the shares. If I sell and presumably buy at lower price, that assumes I was able to time that new transaction correctly (which I am not anywhere nearly as good as @rock et al). So I prefer holding on to the bad bet instead of letting go.

     

    Note also that we are IMO entering somewhat uncharted territories, QE static is over and it is now QE declining gradually. The market and futures dynamics are different. Will contango continue, or do we perhaps enter the ambigious or even backwardation 2007-9 years for SVXY?

     

    Important graph here:
    http://seekingalpha.co...

     

    Also, Bill Luby points out that VIX averaged 14.3 in 2013, which was unusually low average in the long term (which is ~20):
    http://seekingalpha.co...

     

    Perhaps this year the average (and also dips) will be higher. Basically we might need to adjust our SVXY buy and sell signals to something a bit higher, and only time will tell what these new levels are...while we at the same time try to play the game actively. Perhaps we need to be more aggressive in the buy signals in particular, really aim for VIX 20+ or something instead of VIX 18+? Who knows...

     

    My worst fear is that I bought a plenty SVXY at these VIX 17-18 levels, but the new dips turn out to be 15-16, (and not ~12), while contango reduces to minimal, leaving me w/ dead money sitting in front of a steam roller...
    30 Jan 2014, 07:45 AM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    Seppo:

     

    I agree with you on two separate points:

     

    1. I try not to time the market by going 100% in and subsequently out. I had bought a 30% position in my trading account and will scale additional purchases when I see the opportunity.

     

    2. My trading ranges that I had posted (buy/sell/hold) also said that I would adjust them based on QE and the market. I have now pushed them up by $2 each during the recent market volatility. Thus, my initial buy (depending upon other items also) would be a VIX over 18

     

    Finally- I do not like to buy when the Spot VIX is higher than front month futures. Assuming everything stays the same (BIG IF), then front month futures will migrate upwards towards SPOT VIX at expiration and thus SVXY will decay. I will wait until it is reversed and we have a decent contango before I make future purchases.
    30 Jan 2014, 09:24 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    I guess average down or bailout is all personal choice. If you are trying to time the market either by mean-reversion or trend you may not want to average down. In my mind the problem with averaging down for this vehicle is you may win say 80% of the time but the 20% could make you cry. The return profile of this vehicle is very similar to selling naked SPY straddle/put on a margin account based on one presentation I saw on CBOE's risk conference. So imagine what you would like to do when you are selling naked straddles? Bailout or average down? I personally prefer bailout but still there is no clear answer.
    30 Jan 2014, 09:34 AM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Probably best to get out of SVXY until you can feel more confident with the trades.
    30 Jan 2014, 03:43 PM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    Premarket looks good. I will hold my positions but will watch the market closely with a finger on the trigger.
    30 Jan 2014, 08:55 AM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    V ratio has been above one all morning and SVXY is up 2%. Plan to keep an eye on the V ratio. If it falls below 1, I will sell half of my position.
    30 Jan 2014, 11:14 AM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Vratio is back above 1 - all in?
    30 Jan 2014, 12:54 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » All - Learning as I go. Bad idea to be all in, I rushed in to soon which made me rush out to quick. I should have been less than 80% in so I could average down on extra pullbacks that don't have a hard red sell it all signal - like yesterday. Lesson learned. I will NOT be all in until a certain signal of mine is green AND VIX looks to close below 15.

     

    Strange things going on. Vratio positive but Contango moving slow in wrong direction and another indicator I use moving in the wrong direction slightly.

     

    I will keep looking for entry points but not sure if I will buy more today or not. Have to see what the close looks like.
    30 Jan 2014, 02:30 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Agree on not all in for now. I think it is better to have several (at least 2 ) systems as diversified as possible at the same time and only allocating certain capital to each system. It does not need to be complicated. It could even be as simple as signals from different contributors on SA like Rock, RJL, Oceanman and etc. But you do need to go through their trading signals for the past few years to see if their return profiles are highly correlated, say 90%.
    30 Jan 2014, 03:55 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Not buying today. Indicators going in different directions. I am not convinced of todays pop yet....Still 20% in SVXY @ $63.03
    30 Jan 2014, 03:58 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Or you could just AND(trading signals from each of them) to feel more confident in your trade :D
    30 Jan 2014, 04:14 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    I did not buy any more either (still at 30%)

     

    I do not like spot VIX being higher than front month futures in periods of uneasiness.

     

    This leads to front month migrating to spot as we get closer to future expiration.

     

    I am looking for VIX to be at least at 18 (maybe higher) before I make a second buy (10-30%)

     

    Good luck all.
    30 Jan 2014, 04:37 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Do you guys know whats keeping VIX at 16+. Is it the EM? or Something else.
    30 Jan 2014, 04:49 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Looks like there is some backwardation in the front months.
    30 Jan 2014, 04:49 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1728) | Send Message
     
    RJL1955, I believe we still have about 3 weeks till Feb future expiration. Plenty of time for the VIX to drop...
    30 Jan 2014, 05:07 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    Do you want to invest on what you HOPE to happen?

     

    Do you want to invest where there is no contango?

     

    Do you want to invest in general market uneasiness?

     

    For me, the answer is no and wait for these items to turn around.

     

    If I do anything, it may be a swing trade where I buy when VIX reaches near 20 and sell when VIX is in the 16s.
    30 Jan 2014, 05:15 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    EM is just an excuse.

     

    What I see are:
    1. Market went up too much last year and you have some profit taking
    2. Tapering is now in full force and market needs to find an equilibrium
    3. Debt ceiling coming up.

     

    For my account, it is better to be mostly in cash.
    30 Jan 2014, 05:18 PM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    Understand, thats been the theme from year started. The other reason i think, people think it may be false bounce back, and thats why i think people started buying protection towards end session hoping s&p will give up the gain. I guess what we want two consecutive day s&p gain. Lets see what happens tomorrow.
    30 Jan 2014, 05:49 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1728) | Send Message
     
    I don't know, it appears every VIX related trade anyone (including me) on this comment section does is pure speculation after all. It's all based on "hope" and probabilities, etc. So, i don't see how this is any different than the usual haha.

     

    How do you judge 'general market uneasiness' ?
    30 Jan 2014, 11:22 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    General market uneasiness

     

    I look at:

     

    1. General direction of market
    2. Number of new highs versus lows
    3. Overall earnings reports in total (when we are in earnings season)
    4. Interest rates
    5. GDP
    5. Political situations (debt ceiling,)
    6. Economic situations (how is the rest of the world doing)
    7. FED

     

    Not necessarily all in the order.
    31 Jan 2014, 08:22 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Also the headlines in WSJ. Back in 2011 it was all about Greece and Euro and until that problem was finally eased the market condition was really bad. This time it is emerging market in the headlines. So far I have not seen a viable solution for the EEM's dropping currencies and judging from the exchange rates turbulence this vicious cycle might not be over yet.

     

    Painful? Yes indeed as I lost ~11% YTD.
    Nervously excited? Yes, the more the drop the larger the re-bounce. Look at 2009 and 2012. Even if you are late to the party you can still harvest a handsome gain.
    31 Jan 2014, 10:22 AM Reply Like
  • jamesingram32
    , contributor
    Comments (563) | Send Message
     
    good comment Windchime.
    I'm up zero for the 2 months, 7 days ago I was up 30%! 10 days ago, zero. It's been volatile.
    I've held on to last years gains...so far!
    I, too, am intending to jump on large if/once we bottom

     

    however, it is interesting that thje spot at 17.86
    and feb at 17.10 are closer than they have been for a while...
    ...
    31 Jan 2014, 11:07 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1728) | Send Message
     
    windwine, didn't turkey just jack up interest rates to temper currency swings? That's a start...
    31 Jan 2014, 11:07 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Wind - Right on! Armageddon = Opportunity. I secretly pray for a massive washout....so I can dump my other 80% into SVXY and ride a 50% gain back up!
    31 Jan 2014, 11:42 AM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    I do not know how things would go either.

     

    Turkey jacked up its rate and the stock market reaction was lukewarm at most. Russia is unwilling to raise rate as its GDP growth is in jeopardy. I am inclined to say things are not over yet given there is no action from India and Brazil yet and who knows what could happen to China's shadow banking (one big trust product almost defaulted recently). I will check today's WSJ later to see how macro events are evolving.

     

    Meanwhile I just checked my WSJ notes in early August 2011, ~08/04 ECB purchased bond from Ireland and Portugal, ECB signaled it would buy Spanish and Italian bond ~08/08, Japan devalued its currency ~ 08/08,~ 08/09 ECB's bond purchase eased investor's contagion fear.

     

    Based on those actions you might think the market would go up but XIV went down further from ~10 to ~5.

     

    I am not saying things would get worse but in my mind it is too early to all-in the "bottom" now. Besides, it is the lunar new year in Asia, who knows how their markets would react when reopen and how that fear or exuberance would affect U.S market.

     

    I could totally be wrong again :-)
    31 Jan 2014, 11:55 AM Reply Like
  • VTH
    , contributor
    Comments (133) | Send Message
     
    whats Vratio? is it VIX/VXV ?
    30 Jan 2014, 02:22 PM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    just the reverse.

     

    VXV/VIX
    30 Jan 2014, 02:28 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » No clue why the VIX popped over 1 point into the close. Just glad I didn't buy anymore today.
    30 Jan 2014, 05:17 PM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    I plan to sell at the open. Rock, what about buying uvxy to take advantage of this correction?
    31 Jan 2014, 07:37 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » I am not good at timing UVXY. Only if we go into backwardation for a few days is it worth the risk to play UVXY - for me. Others might like it but I get burnt more often than I make money on it. Let's see if this gets really bad then I may play a little.
    31 Jan 2014, 08:27 AM Reply Like
  • dd2020dd
    , contributor
    Comments (75) | Send Message
     
    Been trading XIV for several years. Have not seen such unusual activity in the volatility as has transpired in the last week. Am in uncharted territory as we speak, Seems like a new norm of a 15-17 VIX may be established for the near term. Am 100% in XIV/SVXY after adding 20% at 30.15 after hours. hope VIX does not head towards 20. Mean reversion has been my friend and hope it will return to the levels of the last several years.
    Any advice/insight?
    30 Jan 2014, 06:24 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Trading these products is not a science, or even an arbitrage opportunity, so best to just keep an eye on it and perhaps stop-loss it. If mean reversion has worked for you in the past and you feel confident with your trade, stick with it. No one on here is a psychic when it comes to vol ETFs - I think we're just all here because we like trading them and the community.

     

    I myself am sitting on the sidelines...
    31 Jan 2014, 03:20 AM Reply Like
  • hunterhsu08tw
    , contributor
    Comments (90) | Send Message
     
    way to go ..... old pals
    10 Feb 2014, 09:25 AM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Long Vol etfs taking off in premarket!
    31 Jan 2014, 07:20 AM Reply Like
  • RJL1955
    , contributor
    Comments (318) | Send Message
     
    Here is a good reading article

     

    http://bit.ly/1iTqSgl

     

    Note the author uses the inverse ratio than what Rock uses, but looks at when the ratio is over 1. This is the same thing that Rock uses (inverse ratio, but looks at the ratio when it is under 1), to try to establish the bottoms.

     

    Interesting is that he sees the bottom at the S & P at 1765 before the next big bounce up.
    31 Jan 2014, 08:25 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1728) | Send Message
     
    OK, so VXV/VIX is now below 1. Anyone buying?
    31 Jan 2014, 11:14 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » 1775 pivot keeps holding, this is the 4th time we have bounced off that area.... So eventually we either break through that resistance and get hammered for a bit or the more likely thing we bounce around this level until Fridays jobs number and then go higher as this "selloff" has lasted almost a month - normal "selloffs" last about 20-35 trading days or 1-1.5 months. I think we are at day 23.

     

    My 3 biggest indicators are still solid Red but moving in the right direction....let's see how we close. Is everyone having fun yet!! :)
    31 Jan 2014, 11:38 AM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
     
    That 1768ish level is what I am watching. Not because I think a big rally is coming off of it, but because If it fails, it's a long way down!

     

    Today is a huge POMO day - $4B cash infusion (or somewhere around there). Let's see if we get a bounce.

     

    I had come up with a 'max pain' last resort "Armageddon" level of 28.50 on my XIV position earlier in the week (good to have a written trading plan in a market like this). Fortunately we bounced on the open and I didn't bail. It seemed so far away even yesterday and we sliced through it this morning. I've been trimming back my positions on bounces this week and glad I did - though i did not pick up any more shares this morning and have mixed feelings there.

     

    Of note, VIX did not breakout over levels we saw earlier in the week - even in the panic this morning. I am not a forecaster, but we do have mean reversion on our side with yet another failed VIX breakout. And how much further can the 1 month and 2 month futures get pulled up - when that collapses we will have some serious gains. Both the front and back of the curve (XIV/ZIV). We can pivot either way here but am hoping we met "max pain" this morning. What happens when the POMO spigot shuts off will be telling I think today.
    31 Jan 2014, 12:09 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2063) | Send Message
     
    Tough to be in insurance business when Sandy hits... :)
    31 Jan 2014, 06:37 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Look at this guy:

     

    http://bloom.bg/1deRb8K

     

    An investor sold about $18 million in calls on the Chicago Board Options Exchange Volatility Index, a strategy that will be profitable as long as the VIX doesn’t keep extending last week’s surge.

     

    The trade included the sale of 250,000 February 22 calls for about 70 cents each, according to data compiled by Bloomberg and Trade Alert LLC. It happened after the VIX reached an intraday high of 18.99 around 12:20 p.m. New York time. The investor will keep the proceeds if the VIX stays below 22 and the calls expire worthless.

     

    Have fun watching superbowl on Sunday.
    31 Jan 2014, 08:38 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Wind - I think that kind of trade is a great idea (if there wasn't the debt ceiling fight it would be a genius trade...and probably will be anyways) for one huge reason. No one can manipulate the markets to make his trade fail. No one.

     

    That is what I love most about VIX and VIX ETP trading. It is one of if not the only market that can't be manipulated more than a few pennies here and there. Who is going to buy billions worth of SPY Puts in Feb just to screw over this guy. NO ONE! Unlike a market like silver where it only takes a few million to move the needle quickly or say a small cap stock where a bunch of hedgies can short it to death for years just for fun.

     

    No one controls the VIX. True free market trading. Gotta love it!!
    31 Jan 2014, 09:50 PM Reply Like
  • windwine
    , contributor
    Comments (75) | Send Message
     
    Well, Rock I think it is still possible for the big players to squeeze this guy if he is betting $10b instead of $10M. Similar things happened before but with a much longer time to expiration. My wife has another interesting theory that this guy in fact longs say 18 VIX calls and he does not have much profit at the current level. Therefore he is trying to get big players to bump up the volatility to a very high level so he can make a home run with the call spread he did not reveal. :-)
    31 Jan 2014, 10:34 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Yeah, there was a comment about this in the article, that this position was actually converting a previous long call at say 14-15 to a call spread to minimize the impact of time decay on the amount of time remaining, thus locking in profits. Would make more sense given the tail risk associated with such a naked position.
    31 Jan 2014, 10:54 PM Reply Like
  • swashplate
    , contributor
    Comments (116) | Send Message
     
    WASH SALE ? Since XIV and SVXY move fast as a trader how do you avoid the wash sale rule?
    4 Feb 2014, 10:13 AM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » Swash- Don't you just buy the other one?? Sell SVXY and Buy back XIV...what am I missing? With SVXY it doesn't matter about long term, short term. It gets taxed at the 60/40 rule no matter when you sell. So for me - who cares?! SVXY is a futures contract ETF.

     

    "Commodities ETFs and other funds that utilize futures contracts...ETFs are taxed based on the 60/40 rule - 60% long-term gains at a maximum 23.8% rate and 40% short-term gains at a maximum 43.4% rate - regardless of how long the investor holds the ETF."

     

    http://seekingalpha.co...
    4 Feb 2014, 02:02 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Are XIV and SVXY substantially identical to one another? Also, what is a long-term gain in these VIX ETFs, especially SVXY? Since they only trade the forward 2 months, aren't all gains short-term?
    4 Feb 2014, 02:38 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » XIV - ETN (counter party risk via debt obligations)
    SVXY - ETF

     

    They trade almost identical to the penny over longer periods of time.

     

    What is a long term gain? Not sure I understand the question. Taxed at 60/40 rule no matter how long you hold it. Following my trading rules you could have made 200% gain on SVXY trading in 7 full cycle trades last year. If you buy and hold SVXY it typically gets you 50%+ gains unless there are huge drawdowns like 2011.
    4 Feb 2014, 02:59 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    I understand that they two products have differences, but I was wondering if those differences were significant enough to not be considered "substantially identical" to the IRS to not have the wash rule?

     

    Maybe I'm not sure what you mean by 60/40. Let's say you exactly followed your trading rules last year for the 200% gain. Why wouldn't all of those gains be taxed at short-term tax rates?

     

    If the reason is because you are buying into a partnership and so your tax rate is their tax rate, why does SVXY or any vol ETF have any long-term gains on their futures since they are only in any given future for a couple months?
    4 Feb 2014, 03:17 PM Reply Like
  • swashplate
    , contributor
    Comments (116) | Send Message
     
    WASH RULE http://bit.ly/14vLX5Z
    4 Feb 2014, 03:35 PM Reply Like
  • swashplate
    , contributor
    Comments (116) | Send Message
     
    When I sell XIV for a loss, but I want in again less than 30 days do I pay more than the ask price , because of wash sale?
    4 Feb 2014, 03:36 PM Reply Like
  • RVijay007
    , contributor
    Comments (52) | Send Message
     
    Never mind, I think I understand now. The IRS just arbitrarily sets it to 60/40 regardless of how long the futures themselves are held by the underlying vehicle.

     

    Do you or anyone else know if the 60/40 tax treatment is still true if you short a VIX ETF? Or just what the tax treatment is if you short a VIX ETF?
    4 Feb 2014, 03:38 PM Reply Like
  • swashplate
    , contributor
    Comments (116) | Send Message
     
    I admit I am ignorant on this. I learned wash sale last year in a stock. I paid more than I thought, because it added my losses to price. Will it happen if I trade XIV the same way? Does anyone understand what I ask. Thanks for help.
    4 Feb 2014, 03:42 PM Reply Like
  • Rock228
    , contributor
    Comments (744) | Send Message
     
    Author’s reply » The wash rule is a tax issue only. It does not make you pay more or less it just adjusts your average buy price which changes your profit/loss calculation for tax purposes only. For ETF like SVXY it does absolutely NOTHING because no matter when you buy and when you sell at the end of the year you will owe 60/40 tax rule on all of your purchases of SVXY. Period.

     

    Please read the link I sent on 60/40 rule or google it yourself.
    4 Feb 2014, 03:50 PM Reply Like
  • swashplate
    , contributor
    Comments (116) | Send Message
     
    Thanks I am just confused as if wash sale adjust my buy price that should effect my profit % wise on my trade. I will read your link thanks for your time.
    4 Feb 2014, 03:58 PM Reply Like
  • William Andrew
    , contributor
    Comments (52) | Send Message
     
    VIX 19.11, V ratio below 1 and 1.61% backwardation. Good call to wait.
    4 Feb 2014, 04:27 PM Reply Like
  • memshu
    , contributor
    Comments (577) | Send Message
     
    would be nice to have a forum?
    8 Feb 2014, 07:38 PM Reply Like
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