Posted by dontfearthebear
The volatility strategy went long XIV at today’s close. I got in at $21.00.
Posted on January 31, 2013, in Alpha Strategy, Transactions. Bookmark the permalink. 5 Comments.
Any concern that tomorrow morning is unemployment data? Judging from recently history, it will likely be in your favor, but it could be risky for a short term trade.
Yes, it’s a potential catalyst that could work for or against me. At least I can take some comfort in low realized volatility vs implied vol.
Your comfort appears to have been taken wisely.
Just wanted to check with you if you have considered back spread to hedge against sever drawdown. So if you are long XIV you can sell vxx 22 march option for 2 dollars and buy twice vxx 25 march puts. I had done some manaul testing and just wanted to see if you have thought about this stratey. This is strictly for saving you from vxx going from 22 to 40 kind of scenarion where you xiv will be halved. Please share your thoughts.
Hi Bill, thanks for the idea. I have some historical vxx options data but haven’t done any serious systematic testing of hedging strategies. The data is kind of a pain to work with. That said, I’ve tested one or two simple ideas that ended up being too expensive to bother with (e.g. simply buying vxx calls either near or farther OTM and recycling every month or so).
I think what you suggest has promise. I’ll test something similar out next time I play with the data. Would also be interested to hear how it works out if you put it into practice.
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