There had been plenty of discussions about the state of the US market in the past few days but hardly any mention about the VIX which has been making headlines. I thought I will start a thread on it as there are many lessons from it.
There are a couple of recent articles on this subject which i am including as they provide some interesting background and discussions on the subject matter.
XIV trader: ‘I’ve lost $4 million, 3 years of work and other people’s money’
https://www.marketwatch.com/story/x...rs-of-work-and-other-peoples-money-2018-02-06
A few lessons on risk in short volatility strategies
https://adamhgrimes.com/lessons-on-risk-short-volatility/
If you don't understand what VIX is and how it is valued, you are in the same camp as me. First lesson is don't trade something you don't understand especially in how risk is generated. Long story short, the VIX closed at 99.0 on 5/2 and the next day it opened at 10.49. If you were trading some leveraged futures on VIX, you can imagine the financial devastation it made to your account. No history or back test would have made any difference because such a big move had never occurred before.
There are a couple of recent articles on this subject which i am including as they provide some interesting background and discussions on the subject matter.
XIV trader: ‘I’ve lost $4 million, 3 years of work and other people’s money’
https://www.marketwatch.com/story/x...rs-of-work-and-other-peoples-money-2018-02-06
A few lessons on risk in short volatility strategies
https://adamhgrimes.com/lessons-on-risk-short-volatility/
If you don't understand what VIX is and how it is valued, you are in the same camp as me. First lesson is don't trade something you don't understand especially in how risk is generated. Long story short, the VIX closed at 99.0 on 5/2 and the next day it opened at 10.49. If you were trading some leveraged futures on VIX, you can imagine the financial devastation it made to your account. No history or back test would have made any difference because such a big move had never occurred before.