It's based on the daily log-return, mean daily return and mean daily standard deviation, which are:. Selling naked calls for example, is not something for a rookie to try. For investors looking for more risk, there are more highly leveraged alternatives. Moreover, because of the negative roll and volatility lag in that ETN, holding on too long after the periods of volatility started to significantly erode returns. Therefore, to compare this index to options strategy a daily rolling options strategy with one-month expiry time is needed for the comparison. The historical simulations covered a period starting Jan.
Ever since the VIX Index was introduced, with futures and options following later, investors have had the option to trade this measurement of investor sentiment regarding future volatility. At the same time, realizing the generally negative correlation between volatility and stock market performance, many investors have looked to use volatility instruments to hedge their portfolios.
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The major instruments to trade volatility are VIX futures and S&P options. In this article I compare these methods and show when to use each. For long volatility exposure, buying VIX futures. The CBOE reports that trading hours are: am to pm Eastern time, but in reality, the options do not trade until after the first VIX “print”-when the VIX value in . There are several options to trade the VIX. The simplest approach is to buy Exchange Traded Notes (ETN) or Exchange Traded Funds (ETF) on the index. The largest vehicle is the iPath S&P VIX Short-Term Futures ETN (VXX).