Monday, February 7, 2011

VIX and Its Collection of ETF's: Forming a Tradeable Plan

I do my best to track and understand the VIX.  I can't explain the technicalities such as backwardation, contango or even skew. I just attempt to look at this volatility index from a broad, simple man's point of view. Can I use the historical, back-tested price action of the VIX to generate actionable trade ideas? As of right now, I haven't put it all together, but I'm trying. So here is a recap of some studies from the past months.

1/14/11: VIX closed below Bollinger Band (20, 2). The expectations were for an increase in volatility. Actual results below...

Ticker
Name
Date
Price
Ex. date
Ex. Price
% chg
MAE
MFE
^VIX
CBOE Volatility Index
1/14/2011
15.46
1/21/2011
18.47
19.47%
-0.58%
21.93%


So, yeah, the VIX shot up that week. Good, I predicted the correct direction of the VIX, but can I use that to make some money through VIX ETF's? Below is how a handful of ETF's performed that week.


Ticker
Name
Date
Price
Ex. date
Ex. Price
% chg
MAE
MFE
TVIX
Velocityshares Daily 2x Vix Short Term ETN
1/14/2011
45.3
1/21/2011
47.25
4.30%
-7.09%
10.04%
ZIV
Velocityshares Daily Inverse Vix Medium Term
1/14/2011
115.03
1/21/2011
118.7
3.19%
0.00%
3.19%
VIIX
Velocityshares Vix Short Term ETN
1/14/2011
68
1/21/2011
69.63
2.40%
-0.12%
3.26%
VXX
Barclays Bank iPath S&P 500 Vix Short Term F
1/14/2011
31.57
1/21/2011
32.23
2.09%
-3.42%
5.23%
CVOL
C-Tracks Exchange Trade Notes Based on The P
1/14/2011
53.55
1/21/2011
53.85
0.56%
-5.96%
3.66%
VQT
Barclays +S&P Veqtortm ETN
1/14/2011
110.01
1/21/2011
109.96
-0.05%
-0.39%
0.79%
VXZ
Barclays Bank iPath S&P 500 Vix Mid Term Fut
1/14/2011
60.34
1/21/2011
60.27
-0.12%
-2.22%
2.50%
XXV
iPath Inverse S&P 500 Vix Short-Term Futures
1/14/2011
34.05
1/21/2011
33.9
-0.44%
-0.76%
0.59%
XVIX
UBS AG E-Tracs Daily Long-Short Vix 2040 ETN
1/14/2011
25.47
1/21/2011
25.1
-1.45%
-1.61%
0.39%
VIIZ
Velocityshares Vix Medium Term ETN
1/14/2011
86.18
1/21/2011
84.64
-1.79%
-2.22%
0.00%
VZZ
IPath Long Enhanced S&P 500 Vix Mid-Term Fut
1/14/2011
20.34
1/21/2011
19.97
-1.82%
-6.10%
3.64%
XIV
Velocityshares Daily Inverse Vix Short Term
1/14/2011
142.09
1/21/2011
138.35
-2.63%
-5.56%
3.20%
TVIZ
Velocityshares Daily 2x Vix Medium Term ETN
1/14/2011
73.93
1/21/2011
71.17
-3.73%
-4.44%
0.00%


You can see how each ETF fared if you bought on the close 1/14/11 and sold on the close 1/21/11. The right columns show the highest run-up and the worst drawdown intraday. (i.e. if you bought TVIX, you would have closed with a 4.30% profit, but were down as much as -7.09% and up as much as 10.04% during that trade.) On a week where the VIX was up almost 20%, I could've made only 4+% using TVIX. I don't really like that correlation. Although not totally unexpected, a massive VIX move does not create an equal one via ETF's (even leveraged).
-----------------------------------------------------------------------------------------------------------------------

1/28/11: VIX Up 20% in One Day: Bearish Volatility, Bullish S&P 500. The expectations were for a decrease in volatility. Actual results below...


Ticker
Name
Date
Price
Ex. date
Ex. Price
% chg
MAE
MFE
^VIX
CBOE Volatility Index
1/28/2011
20.04
2/4/2011
15.93
-20.51%
-20.56%
0.20%


Again, fortunate to predict correctly and to get a huge VIX move (-20%). How did the VIX ETF's fare?


Ticker
Name
Date
Price
Ex. date
Ex. Price
% chg
MAE
MFE
XIV
Velocityshares Daily Inverse Vix Short Term
1/28/2011
137.5
2/4/2011
150.06
9.13%
-1.32%
11.29%
ZIV
Velocityshares Daily Inverse Vix Medium Term
1/28/2011
121.54
2/4/2011
128.81
5.98%
0.00%
5.98%
VQT
Barclays +S&P Veqtortm ETN
1/28/2011
109.43
2/4/2011
111.63
2.01%
0.00%
2.21%
XXV
iPath Inverse S&P 500 Vix Short-Term Futures
1/28/2011
33.94
2/4/2011
34.46
1.53%
-0.18%
1.53%
XVIX
UBS AG E-Tracs Daily Long-Short Vix 2040 ETN
1/28/2011
24.45
2/4/2011
23.96
-2.00%
-5.32%
1.43%
VXZ
Barclays Bank iPath S&P 500 Vix Mid Term Fut
1/28/2011
58.65
2/4/2011
54.94
-6.33%
-6.33%
0.36%
TVIZ
Velocityshares Daily 2x Vix Medium Term ETN
1/28/2011
65.3
2/4/2011
60.86
-6.80%
-6.80%
1.09%
VIIX
Velocityshares Vix Short Term ETN
1/28/2011
68.97
2/4/2011
64.14
-7.00%
-7.00%
1.35%
VIIZ
Velocityshares Vix Medium Term ETN
1/28/2011
84.64
2/4/2011
78.17
-7.64%
-7.64%
0.00%
VXX
Barclays Bank iPath S&P 500 Vix Short Term F
1/28/2011
32.1
2/4/2011
29.21
-9.00%
-9.41%
1.46%
CVOL
C-Tracks Exchange Trade Notes Based on The P
1/28/2011
50.77
2/4/2011
43.5
-14.32%
-14.32%
0.79%
VZZ
IPath Long Enhanced S&P 500 Vix Mid-Term Fut
1/28/2011
18.86
2/4/2011
15.63
-17.13%
-17.13%
0.11%
TVIX
Velocityshares Daily 2x Vix Short Term ETN
1/28/2011
46.11
2/4/2011
38.13
-17.31%
-17.31%
2.65%


Interesting to see how those inverse VIX ETF's perform. Shorting (available shares?) TVIX could've been an option. Or just buying XIV was a decent choice. I'm slowly starting to figure these ETF's out.  When the VIX drops, those ETF's seem to track the action better than when the VIX rises. (I'm sure a technical explanation exists, but not from me.) Average trading volume is still really low for most them, so I'll probably wait before I venture into some of the newer ETF's.  My VIX explorations will be ongoing...

7 comments:

Anonymous said...

I've been reading a while now since seeing you on Woods blog.

just wanted to say I like the way you think and keep it up.

thanks for posting.

SPY options are liquid and might of been a choice for the expected volatility. (especially when odds are in favor) but not sure how to back test those

Anonymous said...

PS: even if you do only do this for your own benefit, you still have some good ideas

kapil1022 said...

You might want to look at vix futures as part of you analysis rather than spot vix.

Anonymous said...

i sold June VXX1 puts(before reverse split} inOCT and now have a loss.Do i have a chance to coup it or u see it as a downfall? Thx

Chris said...

Thanks to Anonymous (#1 and #2) for reading. I'm glad you appreciate the content.

kapil1022 - VIX futures may be the way to go, but I'm trying to explore these VIX ETF's. When I'm done experimenting, I may realize that VIX futs are better than any ETF available. You're probably on to something there.

Anonymous with the June VXX put. I think it would take flash crash type event to put you back in the money. But please make your own decisions!

vimal said...

Hi. Is there any way I can trade the $QQV.X "QQQ Volatility Index"? If there is an ETF, is it a close resemblence of the underlying index or is it again an ETF that isn't highly correlated to the movement of the base instrument?

Chris said...

not that I know of

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