Recovering from the Latest Volatility Spike

20140820.02XIV (inverse VIX) is up more than 20% from the worst of the volatility spike in July/August. It seems that, for the moment at least, calm (and the short VIX play) has returned.

I focus on XIV because most directional VIX ETP traders (like us) spend most days short the VIX either via inverse ETPs like XIV, or by shorting ETPs like VXX. I focus on 20% because this is my own threshold for what constitutes a “significant” move in XIV or VXX.

The table below shows these significant losses in XIV (i.e. the red periods in the graph above) since 03/2004. They’ve occurred at a rate of about 2.3 per year. Our most recent, while not fun, was also not particularly notable in terms of either depth or length.


Related Post: Visualizing Gains and Losses in VIX ETPs

Good Trading,
Volatility Made Simple

Wonk note: data prior to the launch of XIV has been simulated. We’re able to do this accurately using a combination of the indices and the futures data on which XIV is based. Read more about simulating data for VIX ETPs.

Posted in Real-Time Analysis.