U.S. stocks short secret: UVXY index and VXX and
distinguish the VIX
The VIX index of market volatility.It is an export index derivative, according to the 30 days behind the S&P 500 index option prices, after conversion and concluded.The VIX is also often referred to as index of panic, because the market fluctuations, is a sign of uncertainty, and fear on investors.In theory, of course, the bull market can also have higher VIX.
The VIX itself is not to trade, so a lot of agencies launched some mechanism (so is a derivative of derivative), these include the VIX futures contract, the VIX index options, and basic VIX futures trading funds.Here the VIX futures reflect expectations of future period of time the VIX, can be a short one month or medium for half a year.These Futures as the VIX options (there are 1, 2 months or half year) pricing is the same.The VIX futures have deferred loss (').This is why?Because with the passage of time, the agency will will the VIX futures contract, contract change again next month.Loss of such a sell a buy, in fact, the time value.So, in fact, every day the VIX futures are ', and this rate reflects the past two months the size of the premium difference.
But, don't think the VIX futures only delay loss forever.Sometimes strange things can happen, for example, after two months of futures can be cheaper than a month after the futures!Although rare, but it does happen, we say that the extension of loss actually into backwardation value-added.Why?It reflects the market's expectations of the VIX.If you think the VIX rose, the VIX futures premium, there is';If you think the VIX fall instead, the VIX futures cheap, becomes backwardation.And most of the time, a premium of VIX futures investors to hedgeinsuranceStrategy.
(2) the VIX trading fund series
Basic VIX futures trading funds have this a few:
$(VXX)$ - iPath S&P 500 VIX Short Term Futures TM ETN
$(VIXY)$ - ProShares ETFs: VIX Short-Term Futures ETF
$(VIIX)$ - VelocityShares VIX Short Term ETN
If you put their figure together, you will find them exactly the same.VXX is trading on the market the most, it also has a lot of options.More than other export trading funds (in fact is a derivative of derivative of derivative) others.And we see more of the following:
$(UVXY)$ - ProShares ETFs: Ultra VIX Short-Term Futures ETF
$(SVXY)$ - ProShares ETFs: Short VIX Short-Term Futures ETF
$(TVIX)$ - VelocityShares Daily 2x VIX Short Term ETN
$(XIV)$ - VelocityShares Daily Inverse VIX Short Term ETN
Which UVXY and TVIX is 2 x trading fund, while SVXY and XIV is 1 x trading funds.
(3) loss of quantitative
To say these trading fund loss, in fact, there are two kinds of loss: delay loss and loss of oscillation.Specifically about five trading fund VXX UVXY/SVXY/TVIX/VXX:
VXX: 1 delay loss, no loss of oscillation (many times the ETF n (n - 1) oscillation equation, n = 1) UVXY and TVIX: 2 delay loss, 1 (n = 2) SVXY oscillation loss and XIV: 1-1 delay loss, loss of oscillation (n = 1)
(4) the loss of an example: 2012
Tiger eye now in 2012, the year the VIX volatility, and the five fund performance to these transactions, simple to estimate for the loss rate of the fund.Tiger eye ignore TVIX here, because in March it some measures to get from the management authority of the share price distortion.Theoretically TVIX shall be consistent with UVXY performance.XIV and SVXY is consistent, only calculate SVXY tiger eye.From 12/31/2011 to 12/31/2012, the VIX fell to 18.02 from 23.40, that is only 77%.While this period, VXX fell to 142.12 from 31.81, is only 22.4%.If this year extension assuming loss speed is constant, so this year extension loss cause attenuation to 22.4/77 = 0.29, about a month attenuation to 0.902, namely - 9.8%.The 9.8% is deferred loss rate of each month.
Now to calculate UVXY loss.It is two extension of the loss, that is to say, loss 9.8% twice every month (is two times, not two), that is to say about attenuation to 0.902 * 0.902 = 0.902 per month, namely - 18.6%.The total delay of all year 12 months loss cause attenuation to 0.084.If there is no loss of oscillation, UVXY shall be 0.224 * 0.224 = 0.0502.In fact UVXY fell to 20.9 from 729.75, the attenuation to 20.9/729.75 = 0.0286.So oscillation loss make UVXY attenuation to 0.0286/0.0502 = 0.57, about 4.6% every month.In the end, just calculate SVXY loss.It is 1 - extension of the loss, that is to say, every month about 1/0.902-1 = 10.8% profit.Its oscillation loss is 1, which is 4.6%.Comprehensive profit of 5.7% per month, namely value-added throughout the year to 1.94 times.The VIX fell about 23%, so the total value shall be is 1.94/0.77 = 2.53 times.As a matter of fact SVXY rose from 26.14 to 26.14, 2.51 times namely, be accurate verification.Each transaction to summarize all of 2012 fund loss rate:
VXX: extended losses - 9.8% a month, oscillation loss 0% a month.
UVXY: extended losses - 18.6% a month, oscillation loss - 4.6% a month.
SVXY: deferred profit + 10.8% per month, oscillation loss - 4.6% a month.
Of course, is a bull market in 2012, the VIX fell a lot, these results are not suitable for other years.
(5) the VXX TVIX/UVXY operation and risk
Want good operation method, we must first understand the meaning of these operations.For example, the VXX what to buy and sell the corresponding behavior?The Vix reflects the current S&P on price.So the reason of buying VXX is the current price cheap, going up.So the buyer is bullish on.At the same time, if the robot (not as expected) does not go up, VXX buyer will jump jump into that month next month.That is to say the buyer strongly bullish, constantly pay premium, expects the stock market will crash and jump up.Tiger eye think buying VXX reasons, just in order to protect the larger long positions, unless there is a big bear.As for the TVIX/UVXY buyer, think that is completely unacceptable behavior.In addition to the two delay loss, and loss of oscillation.Buy TVIX/UVXY, might as well buy VXX twice as many.Short VXX/TVIX/UVXY, is the best.Position control is very important, of
course.For example VXX beta nearly 3.0, so every 1 short dao VXX, converted to do three knife SPY to estimate the risk, and even more conservative.TVIX/UVXY Beta is as 6.0.In addition, should remember that if the Vix rose slowly, their compounding cannot calculate by double, and to calculate by square.For example, if the VXX into 3 x, it is theoretically TVIX/UVXY becomes 9 x.Finally, keep in mind that these funds have NAV, change every day, but the price should be close to the NAV.TVIX once last year because the price is higher than NAV, and plunged back near the NAV.
(6) XIV/SVXY operations and risk
In a bull market, long-term low VIX do more XIV/SVXY is a good choice.First low Vix also often means that the volatility of the Vix itself is small, so the XIV/SVXY oscillation loss is not big.The Vix is low, often have many suspect, especially in the bull market early.So the Vix futures extended loss is big, XIV/SVXY earn more.A comparison of two kinds of loss often have profit, more suitable for a long-term XIV/SVXY.So, you will often see free VIX futures price difference, the greater the markets are more doubt, for us to do more, the better the two funds.Of course short VXX UVXY/TVIX is a better choice, as long as the good control positions.How XIV/SVXY sometimes people do, is to use the cash account to buy, not short, spot ads, here must have these people must not open a tiger securities can be
emptymarginAccount.In addition, compared to short VXX/UVXY/TVIX and do more XIV/SVXY, the high volatility of the Vix itself is also a consideration.Oscillation, VXX/UVXY/TVIX will rise, but at the same time oscillation loss is big, the offset.And the big oscillation to do much XIV/SVXY disadvantage.In 2011, for example, do more XIV/SVXY is very bad.Backwardation during a period of time, and a large oscillations.XIV/SVXY throughout the year and also lost a lot.Haven't SVXY (correction: 2011, but should be consistent and XIV).Do more XIV/SVXY, must take into account the risk.In theory, more positions can be reset overnight, thoroughly to see my grandmother.Why?Because the VIX and Futures can double because of emergencies.In the last few decades haven't happened, such as 9.11 in 2001, the Vix is night rose 30%;From 2008 to 2009, a few times the Vix rose 20%.But who knows what happens later.Based on this consideration, the position must be controlled to smaller.