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Weekly ETF Gainers / Losers

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  • convoluted
    , contributor
    Comments (1830) | Send Message
     
    Riddle me this Batman: If VXX is 1(x) and TVIX is 2(x), am I covered if I sell 2 VXX calls per 100 shares of TVIX?
    Technically no, because the TVIX shares cannot be substituted. However, the use of leverage is intriguing. The appropriate ratio would seemingly cover the 'economic' risk. Fewer dollars can create a bigger bang for the buck by buying TVIX and selling VXX calls. The idea is to use fewer dollars to generate expiring option premium-while containing black swan risk. Of course, simple bear call spreads on VXX likely make more sense. But, over an extended time period, it might be a better NPV route to use the cheaper shares.
    21 Mar, 04:31 PM Reply Like
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