FAQs for VXX Trading System:.
The VIX Hunter team boasts a collective 59 years of experience of in-the-trenches option and volatility trading, options floor market making, derivatives structuring and buy side option overlay asset management. A day trading system strategy in VIX futures requires working the spread to enter passively lowering the entry cost but this is suitable for high frequency. This is a follow up to my earlier post on a Calendar Spread Strategy in VIX Futures (more information on calendar spreads).
For investors looking for more risk, there are more highly leveraged alternatives. On the other hand, this ETN has the same negative roll yield problem plus a volatility lag issue - in other words, this is an expensive position to buy-and-hold and even Credit Suisse 's NYSE: CS own product sheet on TVIX states "if you hold your ETN as a long-term investment, it is likely that you will lose all or a substantial portion of your investment.
XIV likewise seeks to deliver the performance of going short a weighted average maturity of one month VIX futures. The TVIX, with its two-times leverage, did better matching about half to three-quarters of the performance , but consistently provided less than fully two-times the performance of the regular one-month instrument. Moreover, because of the negative roll and volatility lag in that ETN, holding on too long after the periods of volatility started to significantly erode returns.
They certainly have a strong convenience aspect to them, as they trade like any other stock. Of course that is your personal decision, but many clients feel more comfortable closing some of their positions before going away for an extended period to a place they cannot follow investments. Can you use this system to trade the options or futures on volatility products? The system is optimized to trade the underlying ETFs themselves, not their options, and we know clients that have tried to use options instead have all reported disappointing results.
ETNs are debt instruments — they do not own anything but a promise to track an index. If an ETN provider goes bankrupt, investors will not receive their investment back because an ETN is considered an unsecured debt instrument. It was a reverse volatility ETN that was shut down as of February 21, after a dramatic fall in value.
Please read the prospectus of each and make sure you understand your risks. Can the effectiveness of the system be impacted by the number of people trading it? The Volatility produts we trade are very liquid, as are the futures they are based on. Professional investment managers are putting millions of dollars into these instruments every day with no adverse effect on pricing.
The VXX Trading system is not exploiting temporary market inefficiencies, nor is it a directional bet on volatility. It is based on how the volatilty products are constructed and the market structure of the VIX futures. We do not see how that could possibly change in the future, and we expect this trading system to continue working many years into the future. Due to the nature of the system and its long term perspective you may be in the same position for several months at a time.
A month, or even a couple months, is too short a time-frame to properly evaluate it. What do I get if I subscribe? Who doesn't want an easy way to make money in the stock market without exposing yourself to excessive risk? But this easy-to-trade system is one of the most exciting trading ideas he has seen in all his years following the markets. Other indicators have also been developed by Len to give you more information on the current conditions for the volatility products we trade.
When trading this system you are either long volatility, short volatility or in cash no position. However, the OptionVue 8 software is not required to be able to trade this system. Subscribers can see the information right on this website and you will receive emails for every trade alert. West Virginia Wisconsin Wyoming. It is built on a simple proprietary indicator that tells you exactly what to trade and when.
But you are not on your own - you will receive emails for every trade alert, special bulletins and monthly status reports. Simply follow the instructions and you are all set. Volatility is mean-reverting, unlike stocks. So while the system is based on market volatility, the returns are not correlated with investments in stocks in general.
The video by Len Yates gives you a full overview of the VXX Trading system and will help you understand the concepts behind the system as well as the trading rules that outline exactly when you should enter and exit trades.
Copies are available from your broker or at www. Futures trading is not suitable for all investors, and involves risk of loss. No statement within this website should be construed as a recommendation to buy or sell a security or futures contract or to provide investment advice. Gain an Edge on Managing Risk. March , Bonita Springs, Florida. Your browser does not support the video tag.
Ever since the VIX Index was introduced, with futures and options following later, investors have had the option to trade this measurement of investor sentiment regarding future volatility.
They trade just like stocks, and can be traded in the same brokerage accounts that stocks can be.