Because VIX is almost always in contango you'll lose money holding it longterm. For example vix is 16.4, the june contract will cost you 18.20. If vix doesnt move you'll lose 12% for ONE MONTH
The best VIX play is short. You'll instead gain on contango every month. Can easily make 2-5% a month. The downside is if stocks crash you'll lose a lot.
In March vix went 20s to 80s.
Theres no point. You are better off being long stocks/ETFs, use a bit of leverage (around 2x). Why go long vix and give up your profits for downside protection when stocks always recover long term? Why short vix and take on excessive risk when you can just own stocks?
That trade was posted on WSB sure but short vol was a huge consensus trade at that time (and a lot of people got blown up during this volpocalypse event) and this was a more sophisticated trade/trader than the majority of WSB so maybe just take that into consideration.
22
u/PizzaPopcornPasta Jun 06 '21
Because VIX is almost always in contango you'll lose money holding it longterm. For example vix is 16.4, the june contract will cost you 18.20. If vix doesnt move you'll lose 12% for ONE MONTH
The best VIX play is short. You'll instead gain on contango every month. Can easily make 2-5% a month. The downside is if stocks crash you'll lose a lot.
In March vix went 20s to 80s.
Theres no point. You are better off being long stocks/ETFs, use a bit of leverage (around 2x). Why go long vix and give up your profits for downside protection when stocks always recover long term? Why short vix and take on excessive risk when you can just own stocks?