oh boy, oh boy, oh boy. This guy wants to trade "volatility" and trades nonlinear instruments based on a derivative (daily return rebalanced ETF) that consists of a portfolio of futures (forward risk, basis risk, term structure risk) that is based on a non tradeable index (VIX) which itself is derived from a portfolio of nonlinear instruments (skew risk, term structure risk, kurtosis and vol level risk) What can go wrong? All I can say: You're definitely diving into a world of serious hurt XD.
@MrMuppet, my motivation was to find underlyings that cannot crashland like it happens with some stocks after ERs and/or their product/service gets negative press... ETFs are IMO immune against such possible dangers. So, then just tell us which products you would recommend instead.
I wouldn't expect anything positive from these guys like Muppet, Overnight etc. They are here only to ridicule and pull down the noobs. They are always telling what doesn't work but never anything about what works. Stop asking for advice publicly before you lose your confidence and give up trading altogether. Now, just wait for the fireworks.
I daytrade uvxy daily, tvix before that and vxx long ago. Sometimes it's excellent, other times choppy. It's difficult to trade, but when it runs up during market selloffs it can be great.
earth_imperator is not a noob. he's a the reincarnation of several banned nicknames - many of them banned for making unfounded accusations against the owners and trolling the site.
So what would you prefer? Should I cheer him up and watch him lose all his money? Nobody will post a working strategy, especially not when it is about arbs, risk arbs and flow.
First of all, it does not matter if an asset can crash or not. All it matters is the price of the insurance. If I can sell a 25 delta put for 5$ on a 7$ stock why would I care if it crashes or not. The put is so overpriced that selling it is like buying a 1:5 dice roll with a 10$ payout for 3cts. You are falling into a noob trap, my friend. First, just because the VIX cannot crash does not mean that leveraged ETFs cannot. They are derivatives, meaning they are not a 1:1 representation of the VIX. When the VIX doubles in a day, a 2x leveraged long ETF will make 200% and a 1X leveraged short ETF will go to zero. This happened already and buyers of the leveraged short ETF got their ass handed to them, although they only wanted to bet on the fact that vol will come down eventually. Second, when everyone asumes that an asset cannot crash land, what will that do to the price of the puts? Do you think you can sell an expensive put and collect the decay? When nobody bets on a crash, nobody will buy puts and that makes them cheap. VIX products have their purpose, don't get me wrong. They have a build in decay but they are NOT bets on the VIX. They are bets on autocorrelation of the VIX. When autocorrelation is high, they will trend a lot. When VIX is choppy, they will decay a lot. You can daytrade them like some do, but if you're planning on putting them into your portfolio, you better know what you're doing. Summary: - Know your product! Read the prospectus and if you're not 100% sure if you get the construction of the derivative, don't trade it. - You only can make money in trading when you buy cheap and sell expensive. Now you have to ask yourself, well what's expensive and what's cheap...and figuring that out is 100% of the work of a trader. So stop predicting and start to build valuation models, either quantitative or fundamental. I don't know how often I already posted this but here we go again: Retail should stay away from trading complex competitive products, period. Find a niche market where you don't have to compete against a horde of whales, institutional players, quants and market makers. Markets that are too small to be interesting for the big guys, markets that nobody cares and writes about. Small cap corporate bonds, microcap stocks, exotic currency NDFs, warrants, exotic options (if you got the math down), crypto, emerging market equities, the list is endless. But all I see is monkeys who make it their lifes purpose to figure out where oil, treasuries, US large caps and the ES are headed to. So why exactly do you want to trade a product that you don't understand against people who are 1000x smarter than you? If you cannot spot the sucker on the table, you are the sucker. So unless you can explain who and why someone is selling you those puts for more than they are actually worth, you have no trade here.