Seeking Alpha

MarcJoli's  Instablog

MarcJoli
Send Message
I am an individual investor currently swing trading volatility ETNs (XIV and VXX). I am developing strategies for timing trades and backtesting using excel. Contango is my friend. My handle on twitter is @ContangoMojo
Back To MarcJoli's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (16)
Track new comments
  • Third Eye Market Analyst
    , contributor
    Comments (119) | Send Message
     
    Thanks for the shout out. Your compilation should help many volatility traders.
    24 Sep 2012, 08:53 AM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    Very good article. I'm currently have a a 98% percent position and a 1-2% position with selling at the money VXX Month calls and buying $1 more calls for a slight debit. My strategy is to limit the downside of my position if VIX jumps suddenly. Any advice or thoughts?
    25 Sep 2012, 07:17 PM Reply Like
  • MarcJoli
    , contributor
    Comments (91) | Send Message
     
    Author’s reply » I hope others can comment on this options strategy. I am just starting to paper trade options myself. Do VXX options offer any advantages in pricing or IV over using VIX index options?
    25 Sep 2012, 09:49 PM Reply Like
  • Third Eye Market Analyst
    , contributor
    Comments (119) | Send Message
     
    VXX options have tighter bid/ask spreads and trader can buy/short sell VXX underlying in a brokerage account. VIX options have wider bid/ask spreads and the underlying instrument is VIX futures, which requires a commodity account (if trading VIX options only, no commodities acct needed).

     

    However, VXX & VIX are two quite different instruments. VIX options are a closer play on VIX itself. VXX is a play on S&P 500 VIX Short-Term Futures Total Return Index.
    26 Sep 2012, 08:47 AM Reply Like
  • thogshead
    , contributor
    Comments (15) | Send Message
     
    Very good and helpful article. Thanks for posting.
    9 Oct 2012, 03:12 PM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    As we are all aware, VIX contagion plagues the long VIX ETF's 80% - 95% of the time. So up to 90% of the time, going long with a VIX Vehicle is a losing strategy. To take advantage of this, I buy VXX LEAP Puts. I just started it this month as the VIX is rising. I have quite a few other strategies specific to the VIX, if anyone is interested.
    9 Oct 2012, 07:36 PM Reply Like
  • MarcJoli
    , contributor
    Comments (91) | Send Message
     
    Author’s reply » Joe, for the Options Newbies reading this, would you please describe an example of your VXX LEAP PUT strategy? What is the cost of the contract, how much total money at risk? What is the return if VXX goes to $30, to $25, to $20. How to manage this trade over time...
    9 Oct 2012, 08:38 PM Reply Like
  • jwingfield
    , contributor
    Comment (1) | Send Message
     
    Marc, this is a terrific list of articles on trading volatility. Can you share details on how you trade VXX and XIV? I am looking at doing the same.
    15 Oct 2012, 01:51 PM Reply Like
  • MarcJoli
    , contributor
    Comments (91) | Send Message
     
    Author’s reply » jwingfield: My assumption is that vix futures are in Contango almost all the time. Therfore I *never* buy VXX.

     

    The best time to buy XIV is after a market shock or a market correction. The week before Dec 1, 2011 proved to be an excellent time to go long XIV. If you remember the market sentiment at Thanksgiving, it was horrible. Most writers and blogger were really down on the market. The VIX was high in the 30's and the market was full of whipsaws. However, at that time we saw Backwardation turn back into Contango over that two week period.

     

    My system waits for some technical indicators and measures to turn Green. When I get 3 to 5 buy signals I go long XIV. When I get a few sell signals, I take profits.

     

    I have not been nimble enough or brave enough to catch and ride VXX in the last year however if we get another August 2011, I would try to trade VXX for a quick short ride, but only if the futures term structure was in Backwardation. I likely would not catch the whole move, but would try to lock in a quick 10% or 15% profit at least.

     

    I am still fine tuning my indicators based on new research I can find in the blogs and articles above. In a future blog post, I will share what my current set of indicators are.
    16 Oct 2012, 10:29 AM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    I'm interested in the indicators that you use. There are a few different MA's that I use in addition to patterns.

     

    http://bit.ly/RDQWhf
    16 Oct 2012, 11:52 PM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    Sorry it took me so long to reply. Overtime at work and school can be a pain sometimes!
    There are a few different options with VXX options.
    1. Buy a VXX at the money put and sell a put with a lesser stock price. My strategy is to risk .50 to get 1.00, and since VXX declines 90% of the time, it can be used as an income strategy.
    2. Buy a VXX Leap such as March 2013 or even January 2014. I History says that January 2014 put will be in the money 100% due to constant contagion, but the March 2013 has about 20% - 40% risk in my assessment.
    - For the XIV Fans -
    1. Sell a Deep in the money VXX Call and buy 2 out of the money VXX calls. If you own the monetary equivalent of 100 shares of VXX in XIV, you are almost perfectly hedged in case of a volatility spike.

     

    I stepped away from the XIV strategy above due to the fear of "losing my xxx" when XIV dropped like a rock last fall. The vast concentration of my portfolio is in HDV, as it is very stable to SPY during a market crash. The allocation of XIV can range from 0% to 50%, and as of right now I do not hold any, as I sold all my remaining shares today. VIX will spike, but when is the answer, and I'm only buying and holding VIX calls for one week at the most when VIX drops below or close to $14.00. There are a few interesting moving averages that are very good indicators when there is a REAL VIX break-out, and they did not trigger during June but did during November 2011.

     

    Instead of playing World of Warcraft, I do this, and it's a lot more fun to me. Hope I didn't bore too many people, and hopefully I can find some flaws so improvement can be made.
    15 Oct 2012, 11:05 PM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    I almost think this is going to be the yearly VIX pop. Seems like the right set-up since the blue chips are falling and VIX is pretty close to being above November's future price already. I'm about 50% cash at the moment, and if I loose 25% of my investment, that's fine with me as long as I scoop up XIV when it gets below $10 again.
    19 Oct 2012, 08:34 PM Reply Like
  • MarcJoli
    , contributor
    Comments (91) | Send Message
     
    Author’s reply » Joe, I am watching this closely too. As of yesterday the VIX is flat to the front month future. The term structure is not in Backwardation just yet as the December still has a 5% premium over November, but this is the smallest premium we've seen since March. VIX:VXV ratio is also flashing the "caution - go to cash" signal.
    20 Oct 2012, 11:33 AM Reply Like
  • Stock Market Joe
    , contributor
    Comments (129) | Send Message
     
    I really wonder how Monday is going to play out. I've wondered if there is any correlation between the Asian and European markets Monday opening return and the Monday return of the S&P. Hopefully we see some Backwardation, as I'm really hoping to be able to buy some February or March VIX puts when the VIX futures drops back into Contango.
    21 Oct 2012, 04:10 PM Reply Like
  • ikkyu
    , contributor
    Comments (233) | Send Message
     
    Great resources. Spent a thoughtful evening perusing all of these. Thanks for compiling them.
    Cheers from Osaka,
    john
    2 Jan 2013, 09:01 PM Reply Like
  • subaham1
    , contributor
    Comments (42) | Send Message
     
    THANKS for putting these informative articles in one place!
    22 Mar 2014, 01:40 PM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.