OK, I get it! This video was release FEB 20 @09:00. I thought it was a Live Session. Eli, waiting for your Subscription Service to start up! Thank you for spending your time to try & help us understand these complex concepts.
Ah it's probably because I uploaded the video last night and set it as a premiere. It can see why it would appear at first glance similar to a live stream. Sorry about that! I've found it to be the best way to upload videos since I don't need to do it at 6:00AM my local time here in Vancouver, Canada. So glad you are looking forward to it and thank you for your support!!
I'm so glad you're finding the content helpful, thank you for your kind words! At some point, I would like to make videos again, just don't have the time / other priorities at the moment :)
SVOL isn’t like the other ETNs. It is actively managed and uses a hedging system. It’s a wildcard because we don’t know exactly how it will behave, whereas with VXX for example, we know based on the VIX futures whether we can expect decay and how much. Not financial advice, but I wouldn’t consider SVOL or any volatility ETN something appropriate for retirement income. I’m not saying the traditional stocks / bonds mix is the best way either (I think 2022 threw a wrench in that philosophy), but volatility notes are no joke and you’d probably want to consider something more stable.
@@TactileTrade actually we do know how SVOL is behaving by paying a 32c dividend consistently And holding up under recent Vol The risk is a massive spike in VIX which they hedge at 25% So time will tell us more?
if I may make a slight correction. the vix future does NOT always expire on the 3rd Wednesday of every month. By definition, it expires 30 days before the 3rd Friday of the next month (30 days before the SPX main expiration).
You're right - I just go off of this resource where the vast majority of the time it does fall on the 3rd Wednesday: www.macroption.com/vix-expiration-calendar/
@@TactileTrade Usually, 3rd Wednesday of the month happens to be the case. The exceptions are few. In general, while the site you mentioned looks reasonable, it is best to go to the CBOE web site (the horse's mouth). The CBOE is the exchange that lists the VIX and its products. Anyway, you explain things very well. Keep up the good word.
Glad it was helpful & thank you for the comment! I'm in Vancouver. FYI - I would avoid VXX specifically right now because a few weeks ago Barclays suspended the creation of new units which has basically created a supply/demand imbalance on the ETN itself which has resulted in it not tracking the VIX futures properly. As far as I am aware, all the other vol ETNs like UVXY etc etc are functioning normally. Here's some more info on it: www.reuters.com/business/finance/barclays-suspends-sales-notes-linked-oil-volatility-2022-03-14/
So, if somebody thinks the market will have a correction, and buys vxx shares, then the price spikes up, would there typically be buyers at the peak, even though the price will inevitably go back down?
Good question. If you look at VXX on Yahoo finance you'll see it has an average volume of ~20m shares/day. This makes it very liquid. Short answer, there shouldn't be any problem getting in or out of it, especially as a retail trader placing relatively small order sizes compared to institutions like hedge funds, etc.
Seems you might be interested in buying VXX right now expecting a crash to happen soon. Is that your strategy? I’ve been doing research all afternoon and might do this but wonder if I should dollar cost average into it or lump sum a lot right now.
@@TactileTrade thank you for your opinion. So many youtubers I see don’t give their financial opinion which is frustrating. Opinions help and they don’t need a license just to give their opinion I wouldn’t think. By the way, great video. I want to try to understand it more. I’ll have to rewatch this and look up some of the terms.
@@TactileTrade can vxx minimum value be lower than the vix lowest value ( usually about 10) Because there is always volotility so vxx will always be higher than 10 Correct??
Yes, that's definitely an exception. VXX is basically broken right now, creating a supply/demand imbalance which normally wouldn't occur. The other vol ETNs and now ETFs too are still functioning normally though.
GREAT VIDEO! Thanks so much. I will be watching again as I'm still a bit confused. Question: For now, would I be accurate in being long the VXX if I thought investors were shaky about the market in the next 30 days?
Glad it was helpful & thanks for the comment! Generally yes, if you want to be short the market, you could achieve that through long volatility. However, there is the cost to holding long vol ETNs /ETFs when the futures are in contango which is outlined in the video, all things remaining constant. It's the same idea as buying a protective put option, every day you're wrong and the market doesn't crash, the value will bleed out a little, just like any insurance plan. ** In March, Barclays suspended unit creation on VXX which caused it to stop tracking its indicative value, or target index. That means it is not behaving as it is supposed to. Best to avoid it until it resumes, or trade UVXY at a smaller allocation instead.
I been holding vxx short s&p 500 for over a month. Up over 7% should would you sale or hold considering the geopolitical turmoil and future recession??
I’ve been hearing a ton lately about a coming crash and stumbled upon VXX and started to research it this afternoon. Seems like it’s at a really good point right now to buy. Would you recommend putting in a lump sum right now or daily for the next couple weeks or so (dollar cost average)? Or neither? I’ve read your disclaimer and won’t/can’t hold you to anything. Just curious what you think?
The problem with buying VXX, UVXY or any other long vol ETN is the decay they experience when the futures are in contango. Waiting for that crash can be costly. It's very hard to predict when the market will crash and until it does, it just isn't advantageous to be holding them. If the current conditions (which you can check any time at vixcentral.com) hold up, VXX should on average decay by ~0.70%/day. It's also critical to understand that the nominal share price of VXX in relation to where it was months or years ago means absolutely nothing because of the reverse splits, its methodology of rolling the futures and the decay that results. Just because it is down -60% year to date, doesn't mean it is a buying opportunity.
@@TactileTrade After watching this video ua-cam.com/video/SBo5HHANlis/v-deo.html about hedging with VXX I put about 5% of my portfolio into VXX since it seemed like a great time to do so. The Motley fool also bought it back in April 23rd this year do I figured it was a good investment. But then after listening to Ray Dalio talked about his bubble indicators in a UA-cam video from last week, there seems to still be some runway in this market. Also the conference board Leading Economic Index doesnt predict a crash happening anytime soon. So I pulled out of VXX and didn’t lose anything really since it was only a few days. Seems to me that it would only be good to put into VXX if there’s some real strong warning signals across the board. Are there some sources you track to know whether the market is in a bubble or not?
@@Thecross9890 Hello again! I skimmed through the link you shared. Using VXX as a hedge for equities definitely is viable. I personally don't use it in that way but if I did, I'd be sure to keep the position size small and acknowledge it might lose close to 100% of its value. You'd probably want to run some kind of analysis where you look at A) is the average decay experienced by VXX less than another hedging alternative such as buying put options, and B) which pays off more during a crash (through different market environments). VXX might also be advantageous for someone who would prefer not to use options. My guess would be put options are a better hedging tool because of their inherent leverage (more bang for your buck in a crash), and you can always roll longer dated contracts to minimize theta decay (more control), whereas you can't control the decay of VXX or the VIX futures market. What I didn't like in the video was their advice of using arbitrary VIX values as buy or sell signals (i.e. a VIX of 60 = sell). While VIX is highly mean-reverting, there will ALWAYS be times where it behaves different and volatility stays stubbornly low (2017) or stubbornly high (2020). What if it only makes it to 59.99 and you don't sell, then the market bounces and VXX crashes? While I can't tell if we're in a bubble or not, and I don't think anybody can, I do have a number of indicators I track daily that can give warnings early enough to contain the damage: • VIX futures, ratios between front months, and months further out in time. • VIX, compared to its cousins, VIX9D, VIX3M, VIX6M. • Hedging activity in the big index ETFs - put/call ratios. • Differences in implied, and historical vol. • Long term moving averages like the 50, 200 day, bollinger bands, standard deviations - basically the broad, commonly watched trend following technical analysis indicators. None of these^ are proprietary, but the way I combine them and what I derive from them is. I've found traditional indicators like the treasury yield curve, Shiller PE, 'Buffet Indicator', etc etc don't actually translate into actionable trade signals.
Thanks for the reply. I don’t think my Roth with Fidelity can trade options. I think I need to get Approved for that. And I basically understand options on a basic level. That’s why I was very interested in VXX and just keep putting into it every week or so until the crash might happen. I also agree with you that the VIX shouldn’t always be traded at those numbers they suggest. That’s very clear from charts. I’d be very curious to track hedging activity in the big etfs. I imagine that would be a great signal to follow. How do you follow that? What source?
I hate to quibble with you but @7:30 you stated that contango is due to "traders expecting greater volatility further out in time "but that's not entirely correct, much if not most. of the contango is due largely to Time premium.
I would say the time premium and volatility risk premium are heavily tied together and perhaps even the same concept. The longer the time horizon, the more likely it is we would experience higher volatility. I guess what I should have said is that greater volatility further out in time isn't so much expected, as it is just more likely to occur the further into the future we look. It's the same thing with why selling option premium works - OTM options have value because of the time/volatility risk premium and their potential of paying off. It's also the same with short term and long term interest rates. The further out in time, the more conditions can change, the higher potential for opportunity cost, thus anybody buying a bond for example should be compensated with a higher yield the longer their investment is locked in.
This was an exceptional tutorial! Well explained:)
OK, I get it! This video was release FEB 20 @09:00. I thought it was a Live Session. Eli, waiting for your Subscription Service to start up! Thank you for spending your time to try & help us understand these complex concepts.
Ah it's probably because I uploaded the video last night and set it as a premiere. It can see why it would appear at first glance similar to a live stream. Sorry about that! I've found it to be the best way to upload videos since I don't need to do it at 6:00AM my local time here in Vancouver, Canada. So glad you are looking forward to it and thank you for your support!!
blufilm
Hello.
You make excelent videos. I wish you made more since you went under the grid in the last two years
I'm so glad you're finding the content helpful, thank you for your kind words! At some point, I would like to make videos again, just don't have the time / other priorities at the moment :)
Im trying too size up SVOL as a primary income source as I transition to retirement I continue to study thank you for this
SVOL isn’t like the other ETNs. It is actively managed and uses a hedging system. It’s a wildcard because we don’t know exactly how it will behave, whereas with VXX for example, we know based on the VIX futures whether we can expect decay and how much. Not financial advice, but I wouldn’t consider SVOL or any volatility ETN something appropriate for retirement income. I’m not saying the traditional stocks / bonds mix is the best way either (I think 2022 threw a wrench in that philosophy), but volatility notes are no joke and you’d probably want to consider something more stable.
@@TactileTrade actually we do know how SVOL is behaving by paying a 32c dividend consistently And holding up under recent Vol The risk is a massive spike in VIX which they hedge at 25%
So time will tell us more?
if I may make a slight correction. the vix future does NOT always expire on the 3rd Wednesday of every month. By definition, it expires 30 days before the 3rd Friday of the next month (30 days before the SPX main expiration).
You're right - I just go off of this resource where the vast majority of the time it does fall on the 3rd Wednesday: www.macroption.com/vix-expiration-calendar/
@@TactileTrade Usually, 3rd Wednesday of the month happens to be the case. The exceptions are few. In general, while the site you mentioned looks reasonable, it is best to go to the CBOE web site (the horse's mouth). The CBOE is the exchange that lists the VIX and its products.
Anyway, you explain things very well. Keep up the good word.
Just watched your video.
Thanks, just trying to wrap my head around the concept.
Where abouts in Canada are you from?
Glad it was helpful & thank you for the comment! I'm in Vancouver. FYI - I would avoid VXX specifically right now because a few weeks ago Barclays suspended the creation of new units which has basically created a supply/demand imbalance on the ETN itself which has resulted in it not tracking the VIX futures properly. As far as I am aware, all the other vol ETNs like UVXY etc etc are functioning normally. Here's some more info on it: www.reuters.com/business/finance/barclays-suspends-sales-notes-linked-oil-volatility-2022-03-14/
So, if somebody thinks the market will have a correction, and buys vxx shares, then the price spikes up, would there typically be buyers at the peak, even though the price will inevitably go back down?
Good question. If you look at VXX on Yahoo finance you'll see it has an average volume of ~20m shares/day. This makes it very liquid. Short answer, there shouldn't be any problem getting in or out of it, especially as a retail trader placing relatively small order sizes compared to institutions like hedge funds, etc.
Seems you might be interested in buying VXX right now expecting a crash to happen soon. Is that your strategy? I’ve been doing research all afternoon and might do this but wonder if I should dollar cost average into it or lump sum a lot right now.
@@Thecross9890 I personally wouldn't buy it at this moment based on the multitude of data I track and based on the term structure at vixcentral.com.
@@TactileTrade thank you for your opinion. So many youtubers I see don’t give their financial opinion which is frustrating. Opinions help and they don’t need a license just to give their opinion I wouldn’t think.
By the way, great video. I want to try to understand it more. I’ll have to rewatch this and look up some of the terms.
@@TactileTrade can vxx minimum value be lower than the vix lowest value ( usually about 10)
Because there is always volotility so vxx will always be higher than 10
Correct??
What about when Barclays’ stopped issuing shares and VXX jumped 60%?
Yes, that's definitely an exception. VXX is basically broken right now, creating a supply/demand imbalance which normally wouldn't occur. The other vol ETNs and now ETFs too are still functioning normally though.
GREAT VIDEO! Thanks so much. I will be watching again as I'm still a bit confused. Question: For now, would I be accurate in being long the VXX if I thought investors were shaky about the market in the next 30 days?
Glad it was helpful & thanks for the comment! Generally yes, if you want to be short the market, you could achieve that through long volatility. However, there is the cost to holding long vol ETNs /ETFs when the futures are in contango which is outlined in the video, all things remaining constant. It's the same idea as buying a protective put option, every day you're wrong and the market doesn't crash, the value will bleed out a little, just like any insurance plan.
** In March, Barclays suspended unit creation on VXX which caused it to stop tracking its indicative value, or target index. That means it is not behaving as it is supposed to. Best to avoid it until it resumes, or trade UVXY at a smaller allocation instead.
I been holding vxx short s&p 500 for over a month. Up over 7% should would you sale or hold considering the geopolitical turmoil and future recession??
Hey this video is great! Thanks for the info dude!
Glad you found it helpful! Thanks for the comment :)
Great stuff! popped up on my recommended
Glad you’re interested in the world of volatility!
I’ve been hearing a ton lately about a coming crash and stumbled upon VXX and started to research it this afternoon. Seems like it’s at a really good point right now to buy. Would you recommend putting in a lump sum right now or daily for the next couple weeks or so (dollar cost average)? Or neither? I’ve read your disclaimer and won’t/can’t hold you to anything. Just curious what you think?
The problem with buying VXX, UVXY or any other long vol ETN is the decay they experience when the futures are in contango. Waiting for that crash can be costly. It's very hard to predict when the market will crash and until it does, it just isn't advantageous to be holding them. If the current conditions (which you can check any time at vixcentral.com) hold up, VXX should on average decay by ~0.70%/day. It's also critical to understand that the nominal share price of VXX in relation to where it was months or years ago means absolutely nothing because of the reverse splits, its methodology of rolling the futures and the decay that results. Just because it is down -60% year to date, doesn't mean it is a buying opportunity.
@@TactileTrade I appreciate the quick reply. I’ll try to understand these principals and verbiage more . Thanks brother. God bless
@@TactileTrade
After watching this video ua-cam.com/video/SBo5HHANlis/v-deo.html about hedging with VXX I put about 5% of my portfolio into VXX since it seemed like a great time to do so. The Motley fool also bought it back in April 23rd this year do I figured it was a good investment. But then after listening to Ray Dalio talked about his bubble indicators in a UA-cam video from last week, there seems to still be some runway in this market. Also the conference board Leading Economic Index doesnt predict a crash happening anytime soon. So I pulled out of VXX and didn’t lose anything really since it was only a few days. Seems to me that it would only be good to put into VXX if there’s some real strong warning signals across the board.
Are there some sources you track to know whether the market is in a bubble or not?
@@Thecross9890 Hello again! I skimmed through the link you shared. Using VXX as a hedge for equities definitely is viable. I personally don't use it in that way but if I did, I'd be sure to keep the position size small and acknowledge it might lose close to 100% of its value.
You'd probably want to run some kind of analysis where you look at A) is the average decay experienced by VXX less than another hedging alternative such as buying put options, and B) which pays off more during a crash (through different market environments). VXX might also be advantageous for someone who would prefer not to use options. My guess would be put options are a better hedging tool because of their inherent leverage (more bang for your buck in a crash), and you can always roll longer dated contracts to minimize theta decay (more control), whereas you can't control the decay of VXX or the VIX futures market.
What I didn't like in the video was their advice of using arbitrary VIX values as buy or sell signals (i.e. a VIX of 60 = sell). While VIX is highly mean-reverting, there will ALWAYS be times where it behaves different and volatility stays stubbornly low (2017) or stubbornly high (2020). What if it only makes it to 59.99 and you don't sell, then the market bounces and VXX crashes?
While I can't tell if we're in a bubble or not, and I don't think anybody can, I do have a number of indicators I track daily that can give warnings early enough to contain the damage:
• VIX futures, ratios between front months, and months further out in time.
• VIX, compared to its cousins, VIX9D, VIX3M, VIX6M.
• Hedging activity in the big index ETFs - put/call ratios.
• Differences in implied, and historical vol.
• Long term moving averages like the 50, 200 day, bollinger bands, standard deviations - basically the broad, commonly watched trend following technical analysis indicators.
None of these^ are proprietary, but the way I combine them and what I derive from them is. I've found traditional indicators like the treasury yield curve, Shiller PE, 'Buffet Indicator', etc etc don't actually translate into actionable trade signals.
@@TactileTrade
Thanks for the reply.
I don’t think my Roth with Fidelity can trade options. I think I need to get Approved for that. And I basically understand options on a basic level. That’s why I was very interested in VXX and just keep putting into it every week or so until the crash might happen.
I also agree with you that the VIX shouldn’t always be traded at those numbers they suggest. That’s very clear from charts.
I’d be very curious to track hedging activity in the big etfs. I imagine that would be a great signal to follow. How do you follow that? What source?
What is this? Randomly signed into UA-cam & this popped up... going to wait around to check this out - says Starts 2/20 @09:00
Brilliant
I hate to quibble with you but @7:30 you stated that contango is due to "traders expecting greater volatility further out in time "but that's not entirely correct, much if not most. of the contango is due largely to Time premium.
I would say the time premium and volatility risk premium are heavily tied together and perhaps even the same concept. The longer the time horizon, the more likely it is we would experience higher volatility. I guess what I should have said is that greater volatility further out in time isn't so much expected, as it is just more likely to occur the further into the future we look. It's the same thing with why selling option premium works - OTM options have value because of the time/volatility risk premium and their potential of paying off. It's also the same with short term and long term interest rates. The further out in time, the more conditions can change, the higher potential for opportunity cost, thus anybody buying a bond for example should be compensated with a higher yield the longer their investment is locked in.
Very well done
Thank you very much! I'm glad you found it helpful
Nicely done. Extremely precise and simple. Subscribed.
Glad you found it helpful! Thank you for your support.
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