VIX FUTURES: Abusing Volatility 1/2 (+49%)

Time To Close Our First Volatility Trade.

Executive Summary

• BrainDoζer Theme: S&P 500 implied volatility (VIX) always reverts to the mean.

• UVXY, the VIX product in question, has indeed regressed to the mean.

• Buying back the risk-defined straddle with 49% return on capital works for MacroDoζzer.

1. Recap Situation

So remember, we wanted to make a difference in these volatile markets, and why not with a volatility product. Fighting volatility with volatility, not sure where to put this, philosophy, romanticism, you decide.

In the investment thesis, in a nutshell, S&P 500 implied volatility (VIX) always reverts to the mean. We introduced UVXY as the most capital efficient and liquid underlying to trade VIX movements. Selling a risk-defined straddle would generate a decent income targeting the mean.

UVXY: Abusing Volatility to Generate Income 1/2

2. Why Now?

As predicted, UVXY has reverted to the mean, and now, as the trade made some quick 49% return on risk capital, it would be foolish not to take it off. There are only 22 days left on the contract, and in case of a sudden volatili…