Should we stop shorting volatility at these historically low VIX levels, or should we even go long VIX?

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Should we stop shorting volatility at these historically low VIX levels, or should we even go long VIX?2017-03-03T15:27:45+00:00
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  • Frank Grossmann
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    Post count: 167
    S&P 500 volatility VIX is extremely low, and I also think it is wise to reduce the ZIV investment a little bit.
    However these people are technical traders and they only look at lows and highs or overbought or oversold, but that is not what we should look at, when we buy an ETF like ZIV.
    End of last month there have been some articles in Seeking Alpha which even told you to go long VIX based on technical analysis.
    Going long VIX is about the worst thing you can do, even at these low VIX levels. You invest against the very strong down trend of ETFs like VXX. These people lost more than 10% in 10 days now.
    If there is one thing I learned in the 25 years of investing, then it is to never invest against a trend.
    The VIX volatility is just like a sort of noise which overlays the long term up trend of ZIV because of the 2.5% monthly roll yield. If VIX goes up a little bit, this would be a reason to accumulate ZIV.
    Anyway it is a good thing to have some sort of a adaptive ZIV allocation according to the VIX level. You could have for example 100’000$ for a VIX level of 10, and 200’000 for a VIX level of 20.
    But sure, if there is a 2008 type of financial crisis coming, then we have to close our ZIV positions.
    At the moment I think that the probability is high, that we remain with these low volatilities for quite a while (months or even years), because our national banks (FED, EZB …) today do a much better job in controlling the economy.

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