Thursday, June 5, 2014

Shorting volatility has been very profitable for a long time. Maybe too long?

Here's the $VIX short ETF:

That there is some stunningly one-sided performance, Bruce. Especially since April. I mean look at that RSI.

Here's the weekly:

Even the weekly chart shows XIV going up >2SD. That's not something we normally see.

I have no clue how XIV is supposed to work; I do see that you can lose 75% of your money in weeks when a crisis develops (see August 2011), but if you can buy at bottoms it'll provide you with many multiples to SPY in profits.

So why aren't the hedgies all over this?

And does this have anything to do with the whole "collapse of volatility" thing? I mean, you can now short that volatility, right? So is $VIX down so low because it's being shorted?

Hard to figure this out.


  1. Ritholtz banging the gold-is-dead drum again.

    A number of refutable points and memes, but there it is.

    1. Sorry, I've been in and out lately. Work plus going back to school takes it's toll. Carry on.