Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I would like to find out what is a good instrument to day trade VIX on the short side. I found information that iPath S&P 500 VIX Short-Term Futures ETN (ARCA:VXX) is the most widely traded VIX product (not sure how compared to the futures), but can you short it? Also there is an inverse iPath Inverse S&P 500 VIX Short-Term ETN (ARCA:XXV).
Does anyone have any experience day trading any of these and if so, with what broker? Interactive Brokers has both, but are there any limitations to the duration or frequency of trades?
I only have experience with futures and don't know much about trading ETFs/ETNs so will appreciate any advise.
@isla, I just saw this thread and I know it's been a few months but thought I'd respond. I trade VXX and yes, you can short it, but sometimes it is hard to borrow and you have to locate it.
Aggregate view below--ARCA not included in these numbers because of some data experimentation I'm doing, so you can multiply these numbers by about 2. It is very thick, about half SPY daily volume and usually a penny or two thick. It acts up and loves to take nice .30 plunges every now and then but of course you would expect it to.
I thought that VIX or VXX roughly represents perceived volatility in near future independent of market direction. But the more I watch it, the more often it seems to be just moving opposite to ES (selling off when ES rallies and vice versa).
Historically implied volatility increases in bear markets. As far as I know, there is no agreement on what causes what (plunge in prices requires larger risk premium by investors, or volatility/bad news causes more volatility). But if we look at volatility as just a rate of change in price, why should direction matter? Can this inverse relation be explained by where we are in a bigger picture? Because we went up so much, the downside risk is more important? Did anyone watch VIX intra-day in 2009 when stocks were bottoming out?
I understand this question may get quite complicated, depending on degree of detail, so if anyone can suggest a good online resource it'll be greatly appreciated.
in short the vix is also called "fear" index. the higher the vix, the more "fear" is in the market. but I like to mention that a very low vix can also be a bearish sign. because everybody is bullish and therefore long
a good read is from the cboe. it describes also the year 2009
I personally work with the VXX. I like the way it moves along with it's daily volume. It definitely can move fast though, so I wouldn't recommend being totally lax about your trading!
Even though the VIX and VXX appear to be similar products, they are in fact quite different. Make sure to thoroughly understand each product before you buy or sell it.
For example:
The VXX is an exchange-traded note ("ETN") based on The S&P 500 VIX Short-Term Futures Index, which is designed to provide access to equity market volatility through CBOE Volatility Index ("VIX") futures. Specifically, the S&P 500 VIX Short-Term Futures Index offers exposure to a daily rolling long position in the first and second month of VIX futures contracts and reflects the implied volatility of the S&P 500 Index one month later. The index futures roll continuously throughout each month from the first month of the VIX futures contract into the second month of the contract.
<-- VXX has drag, price moves are dependent on both the first and second month futures.
I personally don't like to outright short the VIX Index or /VX futures . Mainly because it has an embedded asymmetric risk vs reward relationship with a price floor present
Thankfully we have other derivatives to reduce overall risk with the use of other volatility products. With that said there are interesting opportunities to trade volatility as an asset class. With these products just make sure that you know what you are doing and what you are getting yourself into