High probability trade setups and trading strategies for futures, stocks and forex.
Wednesday, May 07, 2014
Explaining Volatility and Levered Drag
Tastytrade had a great video explaining the difference between making bullish bets on VIX, VXX, and UVXY when the VIX index is below 15. To summarize, the 2x leveraged ETF UVXY performed poorly for the long volatility strategy compared to the index and VXX and it was mainly due to volatility drag or more simply, negative compounding due to high volatility over a period of time.