VIX better than Treasuries in June 2014?

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atrchi
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VIX better than Treasuries in June 2014?

Postby atrchi » Wed Jun 11, 2014 7:13 am

I found this interesting thread and I agree with the conclusions reached at that time:
http://gyroscopicinvesting.com/forum/va ... ssion/vix/

But now with the VIX hitting 7-year lows and US Treasuries still near all-time highs, is anyone considering at least a partial substitution of UVXY for EDV in their portfolios?
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MachineGhost
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Re: VIX better than Treasuries in June 2014?

Postby MachineGhost » Wed Jun 11, 2014 7:20 am

Its interesting in theory, the problem is contango and tracking error since ETF's don't track the VIX spot.  According to the VIX inventor, the least damaging way to play volatility is to use a medium-term ETF which kicks back carry interest such as VXZ.  And you need at least a 10% move just to break-even.
Last edited by MachineGhost on Wed Jun 11, 2014 7:26 am, edited 1 time in total.
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MWKXJ
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Re: VIX better than Treasuries in June 2014?

Postby MWKXJ » Fri Jun 23, 2017 2:34 pm

atrchi wrote:I found this interesting thread and I agree with the conclusions reached at that time:
http://gyroscopicinvesting.com/forum/va ... ssion/vix/

But now with the VIX hitting 7-year lows and US Treasuries still near all-time highs, is anyone considering at least a partial substitution of UVXY for EDV in their portfolios?


Sorry for resurrecting such an antique post.

Curious if a small amount of VIX (UVXY) purchased and "forgot about" would make sense in a VP. I'm basing this on charts which include the affect of splits over time:

Image

With so many shorting VIX, year after year, in effect betting that the market will progressively become less volatile over time, it seems a small, long-volatility position could be likened to buying a lottery ticket with bingo-like odds. It's not hard to imagine (expect?) that a global conflict between major powers---as seems to occur at least once during a human lifespan---would usher in an extended era of increasing volatility as money searches for a new home (e.g. Pax-Americana less-than-peacefully transitioning to Pax-China).

This wouldn't be used in lieu of treasuries, but rather, as a hedge against the modern era's utopian globalist optimism. Again, I'm operating under the assumption that this small position would not be rebalanced or otherwise touched. Perhaps the only monitoring would to periodically check whether it crosses a pre-set dollar value (e.g. sell if a $100 invested in UVXY is worth $10,000). Does this make sense?
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dualstow
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Re: VIX better than Treasuries in June 2014?

Postby dualstow » Fri Jun 23, 2017 4:08 pm

Maybe if the "forget about" period is shorter than one day's market session. O0
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Re: VIX better than Treasuries in June 2014?

Postby MWKXJ » Fri Jun 23, 2017 5:37 pm

dualstow wrote:Maybe if the "forget about" period is shorter than one day's market session. O0


Could you elaborate?

The leveraged PP thread cataloged some of these "daily" ETFs and ETNs in use over long periods. While there wasn't a definitive explanation for the lack of observed decay, I believe it was thought to have something to do with the effects of rebalancing (which this strategy does not employ). Is that what you're referring to, that due to a lack of rebalancing, the decay over time would kill the potential lottery ticket effect?

Otherwise, if people here are holding "Daily" ETPs and ETNs such as XIV and SVXY in their VPs for longer than a day profitably, it's unclear why opposite "Daily" products (UVXY) couldn't be held for longer than a day and profitably.

Apologies if I'm missing something obvious.
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dualstow
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Re: VIX better than Treasuries in June 2014?

Postby dualstow » Fri Jun 23, 2017 5:40 pm

Nah, you're not missing anything. I was merely referring to decay.

https://sixfigureinvesting.com/2015/03/ ... uvxy-work/
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Re: VIX better than Treasuries in June 2014?

Postby Kbg » Sat Jun 24, 2017 12:54 am

Don't buy UVXY, ever. Literally you should just roll up the equivalent amount in dollar bills spread out over the investment period, light them and smoke them daily until your cash is all gone. The effect will be the same. SVXY and XIV have made me a whole lot of money as a percent of my portfolio since they were invented...but you really need to have a good plan and know what you are doing. They absolutely will blow up in your face from time to time.

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