6 weeks ago I put in a GTC order for VXX for just under $10. The order actually tripped. I had totally forgotten about it. $1000 odd now simply not earning anything, which it wasn't anyway in cash and can of course drop easily to $800 in value come Monday. After all I don't buy stocks because they immediately go down after buy. When I used to have hair I was responsible for driving quite a few companies into bankruptcy this way.
So now, I'm looking at TVIX - made infamous with that 60% drop sometime this year - and I see it is below $2.
I can't but help thinking all Penny Stock Wizkids (not!) should be looking at TVIX. Thinking of putting in a GTC order for $0.60 for TVIX say 1000 shares. I mean what else can I do? Buy more HSGFX?
Anyone thinking how I'm thinking? $600, assuming this order also trips, instead of buying a laptop I don't really need for the chance in 5 years it could pay a semester's tuition for my kid?
Comments
http://seekingalpha.com/article/676731-tvix-surges-but-investors-should-stay-away
http://seekingalpha.com/article/453971-tvix-etn-sell-off-explained
Article on TVIX and huge debate in the comments section:
http://kiddynamitesworld.com/tvix-you-mess-with-the-bull-you-get-the-horns/
Some of the products that are "VIX-hedged" S & P 500 etfs are somewhat more compelling, but I'd stay away from ETNs and only look at ETFs.
Might the VIX jump because it is at historically low levels? Sure, but the ability to track it accurately by a number of these vehicles (especially TVIX, which - as bad it has been - is also trading with a premium on top of it) has been called into question. These are also definitely NOT long-term holdings, and are much more short-term trading vehicles if used. Apparently this is in the prospectus of TVIX (I haven't read it): “The long term expected value of your ETNs is zero. If you hold your ETNs as a long term investment, it is likely that you will lose all or a substantial portion of your investment.”
Here's an article that also discusses the low volaility lately and why it may continue:
http://www.ifre.com/a-new-regime?/21037545.article
Or, as a commenter on Seeking Alpha noted at the link above, "Volatility is a thing of the past. Meetings, debate, printing money, and leveraging copious amounts of debt is obviously the recipe for a healthy, stable global economy."
Are you pondering buying VIX vehicles as a hedge or more as a trade? If you are looking to hedge, I'd rather short the market. Eventually Hussman may be right, but I question how well his strategy will capture that eventual rightness - as I noted before, it's not as if Hussman is making some bold bet that will pay off huge if he's eventually right.
If you are looking at a hedge, then it becomes orchestrating a balance between your current risk and your desired hedge, which is to say, you don't want to Hussman yourself.
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The other issue with VXX is that I'd be curious if you get a K-1 tax form for holding it (probably not since it's an ETN, but the fact that it's an ETN presents other risks.) Some of the futures ETFs, such as the commodities futures ETFs (DBA, DBC, USCI, GCC) do have the delightful suprise of a K-1 form at tax time, which is why I will never use commodities ETFs again. I don't mind (don't like, but don't mind that much) K-1s for long-term investments such as MLPs, but I think they are upsetting for holding what are essentially trading vehicles.
The Proshares volatility funds do generate a K-1. I don't think VXX is structured in a way that generates a K-1, but it's a matter of just a note to be careful about the possibility of an unexpected paperwork annoyance at tax time with some of these trading vehicles.
I did do some reading, thank you! I'm going to get hell out of dodge (VXX) as soon as I can.
VXX seems low since the VIX itself IS actually somewhat low compared to its historic averages. However that's the "spot price" of the VIX and VXX, as I'm sure you're aware of, "invests" in short-month futures of the VIX. Those prices aren't anywhere near the spot price of the actual VIX and are in pretty heavy contango.
For example, the Oct. futures price, which VXX will be rolling into shortly is 16.2% higher than current Sept. futures price. And the Nov. price is 12.3% higher than the Oct. So if there's not a significant move in the future implied volitility, all VXX is going to do is lose money.
You can get a Jan 13 at the money put on the S&P for about $600 and with historic and implied volitility levels very low it's cheap and with just an uptick in volitility you'd make money.
Options, as kv968 notes below, would be an interesting ... option.