*This article assumes the reader understands how inverse and leveraged ETFs work* Zhang’s 2010 paper, Path-Dependence Properties of Leveraged Exchange-Traded Funds: Compounding, Volatility and Option Pricing, gives a closed-form formula for estimating the decay of leveraged & inverse etfs. The formula: … [1.0] t=time in years (t=1 means one year) b=is the leverage factor (typically… Continue reading Estimating the decay parameters of leveraged & inverse etfs
Tag: vxx
Why to Always Short UVXY Instead of VXX
*This article assumes the reader understands volatility funds, short selling, leveraged funds, and option trading.* There are two major volatility ETNs (exchange traded notes), UVXY and VXX. Most people just assume UVXY is merely a 2x version of VXX, and not much else. Most traders who bet against volatility will simply short VXX without even… Continue reading Why to Always Short UVXY Instead of VXX
Revisiting the SVXY strategy (and why I like SVXY over VXX)
In October 2014 as the Market plunged, I devised a strategy to make money buying SVXY call options. To get up to speed, read part 1 and part 2. I also recommend checking out DRT trading …I just found this site today and it is perhaps one of the best websites on index option trading… Continue reading Revisiting the SVXY strategy (and why I like SVXY over VXX)