/biz/ - Business & Finance

>>50911632
No it's not that bad for two reasons. Futures don't follow the VIX that closely unless expiration is very soon. Even now the August contract is at 21.40 even though VIX is at 19.53. The other thing is that even when VIX stays high you tend to have contango anyway, the only time you don't have contango is for short periods of time when VIX spikes but the market expects it to go back down quickly, but that's not a big deal. All you actually have to worry about is keeping enough margin in case VIX spikes much higher than the usual 35-38 max, it can mean ~50 on an almost yearly basis or ~90 roughly every decade. Of course if you're smart you can quit this trade when you expect turbulence, which is what I expect from the end of this month until January.

But other than that the average monthly difference is clearly positive, even when the market goes down, which is why it's a good trade. If ever you wonder why UVXY, VIXY or VXX look the way they do it's because of consistent contango, it's the price people pay for hedging with VIX derivatives, so that's a force you can count on.