Seeking Alpha

VIX creator unloads on VXX

  • “I bought VXX as a play on volatility. But a week went by, two weeks, and the price went down," says Robert Whaley - known as the father of the "fear index" - who is very much not a fan of VIX Short-Term Futures ETN.
  • "Buying this is about the dumbest thing you could do," he says, after some prospectus digging revealed the product is more or less programmed to go to zero over time.
  • Whaley - recently signed on as a partner in AccuShares Investment Management - has his own product to sell as that firm has volatility ETFs in the works. The AccuShares Spot CBOE VIX Up Shares and VIX Down Shares are theoretically designed to do a better job tracking the CBOE Volatility Index, and could launch as soon as this summer.
  • ETFs: VXX, UVXY, TVIX, XIV, SVXY, VIXY, ZIV, VXZ, VIXM, CVOL, VIIX, XVZ, XXV, XVIX, TVIZ, IVOP, VIIZ
  • See also: S&P Dow Jones: Whaley mistaken in criticism of VXX
Comments (19)
  • Paulo Santos
    , contributor
    Comments (19255) | Send Message
     
    Why would he buy such a thing?

     

    I wrote something similar on TVIX long ago:

     

    http://seekingalpha.co...
    27 Jun, 11:35 AM Reply Like
  • wapiti
    , contributor
    Comments (711) | Send Message
     
    It doesn't help matters that the FED is there to backstop every drop of over 10 points in the market. When markets are artificially inflated and never allowed to have any volatility without Yellen or some other FEDhead on TV it doesn't help matters either
    27 Jun, 11:40 AM Reply Like
  • wapiti
    , contributor
    Comments (711) | Send Message
     
    In fact the whole market is rigged these days. ask michael lewis
    27 Jun, 11:42 AM Reply Like
  • King Rat
    , contributor
    Comments (712) | Send Message
     
    Is that sarcasm or what? Just in case not, he writes books ad nauseum about how to make money in a rigged system so in parroting Michael Lewis by saying "in fact the whole market is rigged" you should add, "but you can still make money".

     

    It's much harder to make money with VXX though.
    27 Jun, 12:47 PM Reply Like
  • David Oldenburg
    , contributor
    Comments (124) | Send Message
     
    The "father" of the VIX, didn't understand or know the way VXX works, before he invested? A simple look at a 1 or 2 year chart illustrates the constant march to zero. I wanna play poker with this guy!
    27 Jun, 11:50 AM Reply Like
  • MartinGale7
    , contributor
    Comments (201) | Send Message
     
    FIX futures have about a -50% pa roll on them. It is likely that there is a huge amount of short interest on this and of course volatility in general. If a wobble happens in the market there could be a lot of short covering in a short space of time!
    27 Jun, 12:08 PM Reply Like
  • David Easter
    , contributor
    Comments (64) | Send Message
     
    It's just an ad. Don't be so serious! But it did get my attention. I might be interested in an ETF that reliably tracks the spot VIX.
    27 Jun, 12:23 PM Reply Like
  • Jon Peter
    , contributor
    Comments (793) | Send Message
     
    Without the contango roll yield decay.
    30 Jun, 07:55 AM Reply Like
  • grendelbane
    , contributor
    Comments (252) | Send Message
     
    I think people misunderstand TVIX. It is not an investment or a speculative play. It is insurance against a black swan event ravaging the market.

     

    Now, it is highly priced insurance. It is at best very short term insurance. I don't think I would ever buy it, (though I have profitably shorted it), but then I would rather suffer the slings and arrows of outrageous fortune than try to time TVIX's inevitable short term spikes.

     

    If looked at as insurance, TVIX, and similar items can well be expected to go to zero. If you insure your car against wrecks, and your house against fires, the insurance premiums that you pay immediately go to zero, don't they?
    27 Jun, 01:10 PM Reply Like
  • leopardtrader
    , contributor
    Comments (1042) | Send Message
     
    That is betting against the insurance premium. Why should the insurance be there in the place..allow nature to take its course :) Of course the odd is pretty low reason why the payout is huge. Therefore insurance cannot be a winning bet in a large sample size..so why pursue it at all ?
    27 Jun, 01:19 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19255) | Send Message
     
    It's not even that, since it's not a good insurance policy if enough time passes after you buy it.
    27 Jun, 01:29 PM Reply Like
  • bapop@yahoo.com
    , contributor
    Comments (18) | Send Message
     
    Where does XIV go over time?
    27 Jun, 01:37 PM Reply Like
  • David Easter
    , contributor
    Comments (64) | Send Message
     
    It goes up nicely AS LONG AS the VIX doesn't spike. But check out the XIV chart (on any finance site) to see what happened in 2011 when the VIX spiked above 30: XIV lost about 74% of its value over a 5-month period.
    27 Jun, 06:30 PM Reply Like
  • june1234
    , contributor
    Comments (2626) | Send Message
     
    Planned obsolescence as its creator noted. I guess they could always do a reverse split to keep it going
    27 Jun, 02:26 PM Reply Like
  • user 127
    , contributor
    Comments (3) | Send Message
     
    Why not play ZIV till volatility started to spike then buy VXX?
    27 Jun, 09:35 PM Reply Like
  • convoluted
    , contributor
    Comments (1942) | Send Message
     
    Jan and Dean noted back in 1964 that "you won't come back from deadman's curve."
    Everyone knows that they were talking about contango. Perhaps some remember the lyrics:
    "I was cruising in my TVIX late one night
    When an XIV pulled up on the right..."
    28 Jun, 01:48 PM Reply Like
  • Jon Peter
    , contributor
    Comments (793) | Send Message
     
    LOL! Good stuff. ; -)
    30 Jun, 07:56 AM Reply Like
  • tmdoherty
    , contributor
    Comments (172) | Send Message
     
    Obviously Whaley has a conflict of interest and hence can't be taken seriously. That is, if he badmouths existing VIX ETPs loudly enough, then that decreases demand for those ETPs but increases demand for the products (and AccuShares) are hoping to foist on the public. Clearly that is exactly the objective.

     

    This is just blatant marketing and Whaley looks for all the world like an AccuShare shill.
    2 Jul, 04:22 AM Reply Like
  • Jon Peter
    , contributor
    Comments (793) | Send Message
     
    Doesn't everybody talk his book sometimes?
    2 Jul, 11:47 AM Reply Like
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