Share this page!

Enter URL or ID to Unroll

You can paste full URL like: https://x.com/threadreaderapp/status/1644127596119195649
or just the ID like: 1644127596119195649

How to get URL link on X (Twitter) App

  1. On the Twitter thread, click on or icon on the bottom
  2. Click again on or Share Via icon
  3. Click on Copy Link to Tweet
  4. Paste it above and click "Unroll Thread"!
  5. More info at Twitter Help
Volatility & Option Trading Profile picture
@VolatilityVIX
Apr 11 • 7 tweets • 3 min read • Read on X
Scrolly
1)  Why does $UVXY reverse split so damn often?

Well if it didn't the price would be completely un-tradable as it would effectively be 0

Yes, but why?  🤔

con't... Image
2)  Volatility ETPs don't trade based on supply and demand

It's best to view them as basically a formula, they all have a set methodology and they track underlying indexes

UVXY tracks with 1.5x daily leverage the SPVIXSTR index Image
3)  The SPVIXSTR index tracks the value of a constant rolling 1 month maturity VIX future  (VX30)

Essentially, where the front two months of VIX futures go, UVXY goes 1.5x the opposite on a daily basis Image
4)  In a stable market the front two month VIX futures  (M1 & M2)  will typically be trading above the VIX index and will gradually be shifting down towards the VIX index through the expiration cycles Image
5)  How often you ask?

As we can see, the VX30:VIX roll yield  (M1&M2 VIX futures prices vs the spot VIX index price) is positive on 82.83% of trading days

About 83% of the time the UVXY has a headwind and tends to bleed down Image
6)  Obviously that leaves 17% where the opposite is true and UVXY has a tail wind

During major market crashes the UVXY can spike violently!

1000%, 1500% maybe more in the next crisis

Obviously don't short with your eyes closed, it's NOT free money

@threadreaderapp unroll

• • •

Missing some Tweet in this thread? You can try to force a refresh
　

Keep Current with Volatility & Option Trading

Volatility & Option Trading Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @VolatilityVIX

Volatility & Option Trading Profile picture
Apr 10
🧵  Seeing the rolling performance of "Short VXX" really puts things in perspective

It's not exactly a consistent vehicle.  There's a massive performance difference between stable market periods and crashes

Tactical trading ONLY!  No buy & hold people

Short VXX rolling 1-year: Image
Rolling 3-year "Short VXX return"

Here we can really see the periods that include a major market crash like the financial crisis, and more recently the pandemic / 2022 market decline Image
Rolling 5-year "Short VXX return"

Golden Era of Short Vol anyone?  Those were fun times...

Yes I do believe they will return.  It may take another crisis to reset the machine, but those fun days will be back! Image
Read 5 tweets
Volatility & Option Trading Profile picture
Apr 9
We know Volatility ETFs like $VXX decay down long term, and in fact are down -99.9% since inception

However, it may be useful for traders to know what levels of Volatility correspond to the WORST VXX performance

Let's use the VIX index to divide the market into quintiles Image
0 - 20% range:

Low VIX seems to be one of the least damaging times to short Volatility.  I suspect that's because we only see these low Volatility levels when the market has been stable for a while, and perhaps more susceptible to a pullback Image
20 - 40% range:

Pretty consistently bad, but as we'll see with higher VIX ranges, things can get much worse... Image
Read 7 tweets
Volatility & Option Trading Profile picture
Apr 8
For Short $VXX performance, what levels on the VIX index give the best results?

- Low VIX for trend following?
- Mid VIX for reversion to the mean?
- High VIX for contrarians?

Let's divide the VIX into quintiles and short $VXX in those 5 ranges: Image
Before showing short VXX performance, we have to divide the VIX up into 5 equal ranges  (quintiles)

Here are the breakpoints:

9.14  /  12.86  /  15.29  /  18.63  /  24.15 Image
0 - 20% range:

When the VIX is in its lowest 20% of values, the short VXX results are spotty at best.  Why?

Likely because very low VIX values represent stable market periods where "perhaps" the market is running on fumes and ready for a pullback Image
Read 8 tweets
Volatility & Option Trading Profile picture
Apr 5
🧵  You'll often hear people say the average VIX Index value is 20

Is it though?  🤔

Now it's true the long-term MEAN is 19.58 Image
2)  But MEAN can be deceiving because the outlier values can dramatically increase the average

Mean is just the average of a series of numbers

Add them all up, divide by the # of values Image
3)  Perhaps the MEDIAN is a better measure of average?

The long-term MEDIAN of the VIX index is 17.77

Half of values below 17.77 and half above: Image
Read 7 tweets
Volatility & Option Trading Profile picture
Apr 4
🧵 How much on average does the $VXX decay ?

VXX was the first Volatility ETP, launched on January 29th, 2009

In that time it has seen a spectacular decline, down 99.9%

It's an insurance product, of course it decays right?  But how much? Image
VXX is not a stock and doesn't derive it's price based on supply and demand

Instead it uses a set methodology of rolling VIX futures and tracks an underlying index  (SPVIXSTR)

Loosely speaking, it's based on what we call the VX30:VIX roll yield Image
Even though VXX launched live in January 2009, because it's entirely based on VIX futures we can simulate its values back to the launch of VIX futures on Mar 26, 2004

From over 6 million down to less than 15$ Image
Read 7 tweets
Volatility & Option Trading Profile picture
Apr 3
Black Monday 1987 🚨

A lot of people think the biggest Volatility spikes were the 2008 Financial Crisis  (89.53)  or the 2020 Pandemic  (85.47)

Not true my friends

The old VIX calculation VXO had a closing print of 150.19 on Oct 19, 1987 Image
And that wasn't even the worst of it

The next day on October 20th, 1987 the VXO hit an intraday high of 172.79

So much for many people's theory that Volatility has some kind of ceiling...  It doesn't Image
Another misconception is that it was a quick spike that only lasted a day or two

Again, not true

The VXO was well into the 100's for nearly 2 weeks  😱 Image
Read 5 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

Send Email!

:(