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VIX is so low… Anyone trade VIX ETFs or another volatility based index? I understand the theory of implied volatility pricing from options models, etc, but I don’t have experience actually trading volatility. Seems to me it might be a good time to go long? Thoughts?

I had the same thought a few months ago and the guys on this site gave me some great advice. Basically stay away because these VIX ETFs becuase they are going to loose you money except in times of extreme volatility. Saved me from loosing a lot of money.

I was looking at it as a longer term investment though, so if your trading you might have different results.

If you want to go long vol, just buy options and hedge the delta with stock. VIX is calculated from the implied vol of short-dated SPX options. You can buy options directly to get exposure to the vol.

I seem to recall the big problem with the vix etfs is that you get killed on the roll yields. You see the official vix staying low so you figure it doesn’t cost that much to buy a bunchm, but every few months you pay a couple of % to roll to the next expiration date.

But presumably that only happens on one side of the trade. The other must generate some carry, except maybe that only accrues to the ETF provider, and not the ETF holder.


how can one find out the roll yield and the effect of exposure to contango? Expense ratios seem to be too low to explain the precipitous declines.

Expense ratios (all data from Yahoo unless otherwise noted)

VXX: 0.89%

TVIX: 1.7% (Investopedia)


UVXY: 1.41%

You need to look at the VIX futures curve. VXX and similar ETN/ETFs buy VIX futures and roll them.