SVIX: Blood On The Streets, Time To Buy

seekingalpha08-06

peepo I wrote an article about betting against the -1x Short VIX Futures ETF (BATS:SVIX) by Volatility Shares back in December 2023. Thanks to the extreme volatility in the past week, the ETF is now ...

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Thanks to the extreme volatility in the past week, the ETF is now ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710744-svix-blood-on-streets-time-to-buy\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4710744-svix-blood-on-streets-time-to-buy","article_id":"2457978850","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1304192083/image_1304192083.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2457978850","pubTimestamp":1722934398,"columns":[],"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"If it goes up another 70% like today, the VIX calls that SVIX holds will be ITM, and this will likely protect the portfolio from further de","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4550":"红杉资本持仓","UVXY":"1.5倍做多恐慌指数短期期货ETF","BK4532":"文艺复兴科技持仓","SVIX":"做空波动率指数期货ETF","TVIX":"二倍做多VIX波动率指数短期期权ETN","SVXY":"0.5倍做空波动率指数短期期货ETF","SVOL":"Simplify Volatility Premium ETF","BK4112":"金融交易所和数据","BK4585":"ETF&股票定投概念","FDN":"First Trust Dow Jones Internet I","CBOE":"芝加哥期权交易所"},"translate_title":"SVIX：街上有血，是时候购买了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CBOE":1,"SVIX":1,"SVOL":1,"TVIX":0.9,"FDN":0.8,"VIXmain":0.6,"SVXY":0.6,"UVXY":0.6},"content_text":"peepo I wrote an article about betting against the -1x Short VIX Futures ETF (BATS:SVIX) by Volatility Shares back in December 2023. Thanks to the extreme volatility in the past week, the ETF is now down over 40% from when I wrote the article and over 55% from the top set just last month. This article is a follow-up for SVIX. This analysis also applies to similar ETPs like the Simplify Volatility Premium ETF (SVOL) and the ProShares Short VIX Short-Term Futures ETF (SVXY). It's important to note that SVIX aims to be -1x exposure to VIX futures, while SVXY aims to be -0.5x, and SVOL is about -0.2x t0 -0.3x exposed. SVIX is clearly the most aggressive of the three. Back then, SVOL was the only ETP of the three with any built-in protection in the form of far OTM VIX calls. This was effectively a hedge against black swan events where the VIX surges over 100% in a few days. As I write this (Monday, 5 August in the morning), the VIX is coming down from 56 at open to around 41. Luckily for SVIX, the fund adopted the VIX calls strategy a while after I published the article. SVIX Holdings (Volatility Shares) Those seem to be VIX 45 calls expiring in September, and the notional size is protection for the VIX futures that are sold short as a part of the -1x VIX futures strategy. As I write this, the VIX is up about 70% since Friday and short-term long VIX futures funds like UVXY and VXX are up 47% and 32% respectively. SVIX is only down 27%, which I take it means the VIX calls it prudently allocated to have kicked in to protect the fund. The VIX has bounds to how high it can go because it is a function of the weighted average of SPX options prices, and puts at least have boundaries and markets tend not to melt upwards, so calls are also effectively capped. I think VIX 41 is quite high and now is a good time to start building an SVIX position. Back To Basics Buy low, sell high is how you make money. With VIX at these highs, the inverse VIX futures funds, with SVIX being the most exposed and aggressive, are at relative lows. The opportunity is clear. The VIX doesn't stay this high for long. It has rarely spent any time over 50 and today has come down from 56 to 40. SPX options will be sold and this will push the VIX down. Currently, the VIX futures term structure curve is in steep backwardation, meaning the contracts expiring earlier are priced far above the ones expiring future out: Term structure, 5 Aug (CBOE) On Thursday 1 August, the term structure was in contango: Term structure, 1 Aug (CBOE) VIX futures backwardation does not last long. Generally, the contracts fall back down as the spot VIX returns to normal levels. The current profit from entering into SVIX right now is that you are effectively selling VIX futures into a backwardation environment, which tends to be a winning bet. How high can the VIX go from here? If it goes up another 70% like today, the VIX calls that SVIX holds will be ITM, and this will likely protect the portfolio from further declines. But going up another 70% from today would mean VIX is at 68, which would be astronomically high considering where the VIX usually is. Buying SVIX now seems extremely probabilistically sound. The downside is extremely limited right now, and the upside is that you are buying into a \"bet against volatility\" strategy exactly when volatility is at historic highs. The risk-reward rarely gets this good. Risks and Conclusion I'm slowly buying some SVIX. I think the biggest risk is that management somehow fumbles the bag with the VIX calls, perhaps closing them all out, right before the VIX goes to 90 in a single day. This scenario would probably completely destroy the NAV. However, a lot has to go wrong. For one, I trust that most people in their position would know to monetize hedges slowly so as to not drastically disrupt the overall positioning of the risk profile. Another thing is that the value of the calls right now are probably what is satisfying what would otherwise be margin calls on the VIX futures shorts. There's no need to get rid of that protection when VIX could still move higher from here. Lastly, it would require another 100% rally in not just the VIX, but the short-term futures as well to really wipe out the NAV. I view this as very unlikely, just based on what the VIX actually is.  I recommend taking on small positions in SVIX. Now is the time to be a little more aggressive and greedy because there is definitely blood on the streets.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2457978850"}