Feb 8, 2018

Update

Here is a chart for the impatient:) currently I see this - wave b of B. Test of MA50/MA200 hourly and then lower to test MA200 daily.
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13 comments:

  1. H2535Feb 8, 2018, 4:21:00 PM

    Thanks Krasi,... That was what I was thinking from yesterday... market will drop (may be Badly) again, because the Yileds again picked up to pre crash level in few days ago. will dip again, to catch some more dip buyers and rip them off

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  2. AnonymousFeb 8, 2018, 6:52:00 PM

    VIX ETNs post is coming, sorry, been busy at work

    Regards,

    Mily

    ReplyDelete
  3. AnonymousFeb 8, 2018, 6:59:00 PM

    Now it looks like some wave 5, not b? Thanks.

    ReplyDelete
    Replies
    1. KrasiFeb 8, 2018, 7:54:00 PM

      If we see one more wave lower below 2600 maybe... but if you look at ES you will see something different.

      Delete
  4. AnonymousFeb 8, 2018, 8:59:00 PM

    What does ES stand for?

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    Replies
    1. KrasiFeb 8, 2018, 9:23:00 PM

      SPX500 futures... I see zig-zag lower.

      Delete
    2. AnonymousFeb 8, 2018, 9:41:00 PM

      It continues going down and fifth wave lower? How about next step? Thanks.

      Delete
    3. KrasiFeb 8, 2018, 10:51:00 PM

      A bottom tomorrow either A or even C is possible. Next week should be up.

      Delete
    4. AnonymousFeb 9, 2018, 12:13:00 AM

      SPY 1H looks like complete impulse 1-2-3-4-5

      Delete
  5. VBFeb 8, 2018, 9:52:00 PM

    Is this going to be a double bottom?

    ReplyDelete
  6. AnonymousFeb 8, 2018, 10:34:00 PM

    I'm looking at front VIX future after S&P cash close and see a potential shooting star and double divergence on MACD on 2-hourly chart

    Regards

    Mily

    Quick post about VIX ETNs tonight

    ReplyDelete
  7. AnonymousFeb 8, 2018, 10:41:00 PM

    I think there is so much confusion around “VIX” ETNs that I decided to make a quick post about how these products work. Let’s start from the beginning.

    VIX Index
    VIX measures IMPLIED (what market participant expect) volatility of S&P500 index over next 30 days, and it is calculated from S&P500 index options prices and quoted in percentage points, i.e. VIX spot (spot=as of now) of 11 would mean expected annualized change, with a 68% probability, of less than 11% up or down, 11% annualized = 3.175% compounded every month for whole year. The reason VIX index tends to increase when market sells off and to stay low when markets are calm is because option prices during sell-off tend to increase due to high implied volatility (=Vega increases)
    VIX Index Futures
    In order to understand how VIX ETNs work, it is imperative to understand VIX futures as all VIX ETPs use futures as underlying. Futures contract is a legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future, and in case of VIX is the market view of where VIX spot value is going to be in X days from now. There are 8 VIX monthly futures contracts and 4 weekly (let’s ignore weekly). Each monthly contract has a fixed expiry date; you can see VIX term structure (or VIX futures curve) at www.vixcentral.com. If the curve is upward sloping, it is called contango, if downward sloping – backwardation (simplification as any futures curve can be partially in contango and in backwardation). Futures contracts are traded on margin, you can find contract specification on the CBOE website or your trading terminal/system.

    VIX ETNs
    Majority retail “investors” think VIX ETNs directly track VIX, which is not the case as the only way to buy or sell VIX Index spot directly is via index options or S&P 500 options (equivalent), instead they offer indirect access to vol via futures. VXX Prospectus makes it clear:
    “The Index is designed to provide access to equity market volatility through CBOE Volatility Index® (the "VIX Index") futures. The Index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index”.
    Long Short-Term VIX ETNs (VXX,UVXY, TVIX) buy first two contracts (UVXY / TVIX are 2xleveraged), inverse ETNs (SVXY, XIV ) sell first two contracts, the exact weight of each contract is calculated from S&P Short Term Futures Index formula (i.e. at yesterday close VXX held around 72% of March contract, and 28% February contract) Majority of time VIX curve tends to be in contango , especially when markets are calm. The reason behind it is the longer to S&P option expiry date, the bigger implied volatility of that option as it spans across longer period. When curve is in contango VXX/UVXY/TVIX lose value overtime as they have to buy and hold 1M & 2M contracts (with daily rebalance, rebalance=they have to adjust percentage of each month in the portfolio)

    I hope it helps,

    Mily

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    Replies
    1. AnonymousFeb 9, 2018, 12:00:00 AM

      I forgot about daily compounding. ETFs track daily moves of underlying which introduces an interesting effect which is more pronounced for leveraged ETFs and can be both advantageous and lethal, and in case of volatile ETFs (such as VIX Short term futures ETNs like UVXY/TVIX) makes them difficult to hold over long period of time. Imagine the following family of ETFs that track same underlying asset:

      WTI Change 1x -1x 2x -2x 3x -3x
      100.0 0.00% 100.0 100.0 100.0 100.0 100.0 100.0
      105.0 5.00% 105.0 95.0 110.0 90.0 115.0 85.0
      99.8 -5.00% 99.8 99.8 99.0 99.0 97.8 97.8
      104.7 5.00% 104.7 94.8 108.9 89.1 112.4 83.1
      99.5 -5.00% 99.5 99.5 98.0 98.0 95.6 95.6
      104.5 5.00% 104.5 94.5 107.8 88.2 109.9 81.2
      99.3 -5.00% 99.3 99.3 97.0 97.0 93.4 93.4
      104.2 5.00% 104.2 94.3 106.7 87.3 107.4 79.4
      99.0 -5.00% 99.0 99.0 96.1 96.1 91.3 91.3

      As you can see asset is almost flat but all leveraged ETFs, regardless if long or short, they have lost value. The advantage is when your leveraged etf keeps gaining everyday so gains compound, i.e. let’s say underlying asset increases +30% over three days, 3x leveraged ETF would compound not to 90% but 107%:

      Asset % 3x % 3x ETF
      Day 0 100 100
      Day 1 110 10% 30% 130
      Day 2 120 9% 27% 165
      Day 3 130 8% 25% 207

      To show how powerful this effect can be, here you can find the gains of 3x inverse ETF when WTI oil lost 75% over two years, DWTI gained not 210% but 2100%

      http://stockcharts.com/h-sc/ui?s=DWTIF&p=W&yr=5&mn=0&dy=0&id=p44126213033

      However this is usually double edged sword, and can be lethal for VIX spike driven long leveraged ETNs like UVXY/TVIX: even if vol raises for several days (UVXY increased 230% over last two weeks) if vol returns to normal, i.e. vix futures returns from 25 as of tonight to normal level like 15, or 44% UVXY would have to fall 60-80% from 27 currently to less than 9 (over few days or week of course). The actual answer is nobody knows what will happen as these VIS products have never seen a bear market as they were introduced after the correction finished in March 2009.

      Regards,

      Mily

      Delete

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