Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 1
Looking for recommendations on any index ETFs based on volatility that you might like to "invest" aka gamble on?
Short term hold, obviously.
Would you bet on volatility rising or falling in the next 6 months?
In general looking for some speculation ideas for volatility-based derivatives.
No. of Recommendations: 6
There are none, you can't buy (or sell) volatility via an ETF, or otherwise.
There are funds that employ VIX futures, e.g. VXX, but that's entirely different than VIX and if you look at the charts you can see how different.
The main reason for the blanket statement above is that volatility is a reading like "outdoor temperature" and is not something that can be bought or sold as you can soybeans, pork bellies, stocks etc. Therefore, the arbitrage argument that determines a 'fair price' for futures on soybeans, pork bellies, stocks etc doesn't work for VIX futures. It's the wild west out there. Buyer beware.
Maybe there's some ETF doing cash secured put selling. But trusting someone else to choose the underlyings and to trade derivatives for you is in general a bad idea, because buried somewhere in the prospectus will be the words "at manager's discretion".
No. of Recommendations: 1
Ted,
Your whole post confused me.
1.
Being long or short VIX futures is the same as betting volatility will be up or down at the specified future date, isn't it?
I get that the ETFs reset each day so to make money you need a steady up or down trend in volatility. If the volatility itself is volatile, the ETF will almost always lose money. But if furtures are really short dated, kinda like buying T bills instead of holding cash, no? (Because in this analogy I don't know how to trade "cash" ie volatility).
2.
I have sold CSPs before. Don't need an ETF for that. High volatility = bigger premia = cheaper stock if it gets assigned. OR, if selling way ITM puts, just cheaper way to buy. Regardless, I would call that taking advantage of volatility when it's high, not necessarily purely buying/selling volatility itself.
No. of Recommendations: 3
1) Sorry to be unclear. The short answer to the question in your first point is, AFAIK, "no". Let me try to explain more clearly:
The point I was trying to make is that the VIX futures are very special futures. Futures are fine in general, nothing wrong with futures, that's not the point, it's that VIX futures prices are not well tied to the underlying, i.e. to VIX (as can be seen by looking at the charts of the VIX futures ETF 'VXX' and the the index '^VIX'). The reason why is that the arbitrage argument that gives a 'fair price' for (most) other futures, e.g. futures on soybeans, pork bellies, stocks, etc doesn't work for VIX, because you can't actually "hold" (or sell) VIX itself. VIX is just a number, and this means that the arbitrage argument and associated process that sets a 'fair price' for normal futures fails for VIX futures. Looking up the arbitrage argument for a future's "fair price" might help regarding this point. Admittedly, the charts do show some relation, but it's not very good and w/o arbitrage setting a VIX futures 'fair price', it's the wild west out there in VIX land. I'm no futures expert, just suggesting that if you're interested in VIX futures you might want to investigate this point.
2) You had asked about index volatility ETFs, and VXX is one of the more well known ones. But it has the problem outline above, as do all VIX futures based products.
If you're comfortable selling cash secured puts on some underlyings yourself, then you can harvest 'volatility premium' where everything is under your control. No issues of VIX futures wrapped into a daily reset ETF arise. I'm selling some CSPs (also CCs) myself, given that the only certainty right now seems to be uncertainty!
