There is an interesting post in Volatility Futures and Options that projects XVIX performance back 5 years. It addresses a couple of things more analytically than I did in my recent post. Specifically how did UBS pick the 0.5 short factor it uses with short term volatility, and how stable has that factor been over time.
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6 thoughts on “Taking XVIX back 5 years”
Yeah, I can short VXX right now with my broker. But I was wondering if shorting VXX becomes harder during VIX spikes.
If anything it will get easier to short. People tend to load up on VXX when the VIX is spiking up. They are hoping for that next leg up in volatility.
You mentioned in a May 11th post that VXX was “Hard to Borrow” on Schwab, and that you thought that a lot of people were probably trying to short VXX. This was only a few days after the flash crash.
Next time we have a VIX spike, will VXX be hard to borrow? Does shorting VXX become more difficult during times of high volatility? I would think there would be plenty of people looking to *buy* VXX during those times (herd behavior), and few people looking to short it.
My impression is that it is not too hard to short VXX at any point if you are willing to check around with various brokers. I’ve never bothered to transfer money to a new broker in order to be able to do this. Instead I have been using XXV (now replaced by IVO), and XIV. These ETNs have the advantage that they can be used in IRAs also, whereas you can’t short in an IRA.
Have you tried taking back XIV 5 years?
My methodology will only work back two years, because that is how long VXX and VXZ have been trading. See here for a 5 year backtrack http://onlyvix.blogspot.com/2011/01/de-constructing-xvix.html