How to trade VIX?

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cfa_mba

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I have been thinking about a pure play trade on VIX (Volatility Index).

How can VIX be traded without a complicated options strategy?
 
I've been looking into ways to trade VIX, often using complicated options strategies, and all I can tell you is: It's complicated, and don't do it if you're afraid of complicated strategies.
 
JoeyDVivre,

I thought CBOE only computes the VIX and posts it. I visit CBOE site quite frequently.

But how to trade it as individual investor? What brokerages allow such trades?
 
Don't have DMA to the CFE, which limits my ability to trade them and get data on them. The biggest problem with the VIX options and futures is that they don't follow the cash VIX exactly. I understand why this is (and it opens up other profitable trading opportunities) but it makes them less useful for porfolio hedging and making market calls on VIX.
 
JoeyDVivre,

The best that I could see so far is the following link... It explains about Options and Futures on VIX.

http://www.cboe.com/micro/vix/vixoptions.aspx

However, I am looking for VIX like a stock/ETF, something to hang on for long term, not option like to bet on a timerange + Something that is available from brokers like E*T/Ameritrade/Fidelity etc...

Hope you can help!
 
That sort of thing doesn't exist. Given that the VIX is range bound, I fail to see why you would want to take a long term position in it...
 
actually i was looking for the same thing for ABX index. BBB tranche got another major blow today when Moody's announced that it downgraded $5.2 billion subprime bonds and SP may follow(http://www.bloomberg.com/apps/news?pid=20601087&sid=akJOnhaU63wk&refer=home).

and when i googled "abx index trading" i came up with that : http://www.portfolio.com/views/blogs/market-movers/2007/06/21/how-the-subprime-abxhe-index-works

can anyone explain what are daily price fixing? is it like a settlement price that we have in futures market? and also last roll pls
thx
 
HoldsideAnalyst,

Timing of VIX is fairly difficult, but the direction can be accurately predicted.

Also the VIX options change like crazy (20% to 80% in a day), so difficult to program trade in our portfolio environment, but the index itself does not change like crazy.

Anyways, checked with E*T & they dont have VIX options for individual investors. May be one day we will have VVV for VIX (like DIA for Dow).

Thanks
 
My point wasn't that you can't timing or make market calls on the VIX, you certainly can. My boss is still kicking himself that we didn't load up on calls back when the VIX was around 11. But to make a "long term", which generally means >1 year, call on the VIX is silly.

They won't ever have an ETF product for the VIX because the VIX is a percentage number, not an index in the sense that it has a base level. Maybe the guys at Claymore will come up with something like that, but I doubt it would fly in the marketplace, especially given how their marcoshares are working out.
 
I don't know why a 1 year VIX call would be silly. Doesn't seem especially silly to me.

Why couldn't we have a VIX ETF that just mimiced the futures contract (although there might be some legal issues related to taxation and whatnot)? In fact, what's wrong with buying and rolling futures contracts? Is there some tax problem with this? You might be able to get around some of those by doing a swap.

In fact, I don't understand this thread at all. The futures link is: http://cfe.cboe.com/Products/Spec_VIX.aspx
I don't know why there would be trouble trading the futures contract. What is to be accomplished here that cannot be accomplished with futures contracts? Why is it complicated to trade VIX using VIX options? I'm lost here...
 
JoeyDVivre,

Your overall assessment is right, but we are talking about individual investors (not HNW), they typically understand stocks/ETFs, Options and Futures, in that order.
 
If there's a market for it, just make an ETF that resembles the ETF that tracks GSCI only with VIX futures instead of GSCI futures.
 
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