AMEX:VXZ   IPATH S&P 500 VIX MID-TERM FUTURES ETN
135 3 2
4 months ago
The VIX             (red line) is near 52 its week lows. I went long on VIXM             on 7/21/2016. After further research I found that VXZ             has higher volumes (more liquidity). VXZ             and VIXM             do not decay as fast as the leveraged ETFs/ETNs. They also react more slowly, peak more slowly, and fall more slowly then the VIX             and the short term ETFs/ETNs. Looking further back in time, shows that shows that VXZ             and VIXM             gradually decay over time. I do not understand the cause of this as they are not rebalanced. Perhaps there is a gradual loss of faith in them as a FIAT marker for the VIX             (anyone who knows the correct reason, please comment/enlighten). Going long at 52 week lows may reduce the risk of medium term holds on this long position. This is a also a good black swan position. I am considering adding more long positions via VXZ             .
4 months ago
Comment: I forgot to add the volume to the chart but the volume is also surging.

An extremely low VIX is highly abnormal and unstable. It will not stay low for long and can never go to zero. It tends to correlate with extremely overbought.SPX500 conditions. The futures market indicates a Fed rate hike will occur Wednesday even though the news pundits are not emphasizing this. I anticipate a "surprise" Fed rate hike will cause a surge in volatility. It may trigger a correction in the US and global markets (strong US dollar is hard on the US exporters and tightens the money supply, is good for exporters to the US but hard on the carry trade).
lukelehepuu
4 months ago
Interesting, good to see people getting long volatility at these levels too!
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ulf_blanke
4 months ago
The decay over time in VXZ is probably caused by the decreasing value of the underlying futures on vix. This is also the reason for the lag.
But I am talking out of the blue. I am just starting trading volatility.
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haug01 PRO ulf_blanke
4 months ago
Thank you for your thoughts. Since these futures are mid-term (months 4, 5, and 6 into the future with month 4 rolling into month 7), they don't react to short/brief VIX movements which are not yet a trend. I think this causes the lag. Futures do not have a decaying time value like options do. While to VIX is an actual numerical calculation/value, the VIX etfs/etns are like fiat currencies. They have no actual underlying value. They are useful for hedging purposes, etc and will follow the VIX over time. Since there is no actual link and no underlying value to these rtfs/etns, the slow downward drift in there mid-term etfs/etns may reflect traders who give up on being long long-term selling to short sellers who are short long-term. Again, this is just a guess and you could be right. Note that oil, cattle, or corn futures would never intrinsically decay over time in a stable market.
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