Alright, sold all of my position in VIX Mid-Term Futures (ticker: VXZ) at $53.60. Took a bath on it as the market has consistently appreciated almost every day this year. Originally I had established the position to hedge a possible market correction after a strong rally through the end of the year. Well, that obviously didn't happen. Even more frustrating, I've been expecting the market to show a strong rally through the first half of the year. So I successfully positioned myself against my 6 month expectations, and then got stubborn about it. So I start 2011 in a hole (down about 1%) and will need to climb back out.
Going forward looking for investment vehicles with:
(1) Pricing power as I expect costs to rise for many businesses. If they can pass along these increases then revenues should grow more rapidly than expected and margins should remain fairly stable.
(2) Beneficiaries of higher commodity prices, likely increasing U.S. interest rates, and pent-up demand.
(3) Larger cap companies trading at attractive valuations with high returns and growth prospects.
Showing posts with label VXZ. Show all posts
Showing posts with label VXZ. Show all posts
Tuesday, February 8, 2011
Tuesday, January 4, 2011
Added ~5% to VXZ Position
Added ~5% to my position in Barclays Bank PLC iPath SP 500 VIX Mid-Term Futures (ticker VXZ) position at $64.94. This brings the total position to ~15% of my portfolio.
Expanding this position to increasingly offset any downside in a market correction.
Expanding this position to increasingly offset any downside in a market correction.
Monday, January 3, 2011
Bought ~10% Position in VXZ
Bought ~10% position in Barclays Bank PLC iPath SP 500 VIX Mid-Term Futures (ticker VXZ) at $64.49.
The volatility index for the SP 500 is trading around $17.30, near the 52-week low. This low volatility suggests, at least to me, that the market has not priced in an appropriate amount of risk for unforeseen events. Indeed, in the Wall Street Journal today there is an article discussing investors' sunny outlook. I foresee three things that may shake this up:
(1) New members of Congress looking to shake things up, starting with a debate over the debt ceiling.
(2) Spotty earnings - Sure, sales looked reasonably good in December, but costs may have risen more.
(3) Macro economic signals leading to speculation/ worries about Fed - Too hot = worries of rising interest rates; Too cold = worries of power to avoid double dip.
Not sure how it plays out, but the market just seems a little too sure of itself at the moment.
Description of VXZ
The investment seeks to replicate, net of expenses, the S&P 500 VIX Mid-Term Futures Total Return Index. The index offers exposure to a daily rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the fourth month VIX futures contract into the seventh month VIX futures contract.
The volatility index for the SP 500 is trading around $17.30, near the 52-week low. This low volatility suggests, at least to me, that the market has not priced in an appropriate amount of risk for unforeseen events. Indeed, in the Wall Street Journal today there is an article discussing investors' sunny outlook. I foresee three things that may shake this up:
(1) New members of Congress looking to shake things up, starting with a debate over the debt ceiling.
(2) Spotty earnings - Sure, sales looked reasonably good in December, but costs may have risen more.
(3) Macro economic signals leading to speculation/ worries about Fed - Too hot = worries of rising interest rates; Too cold = worries of power to avoid double dip.
Not sure how it plays out, but the market just seems a little too sure of itself at the moment.
Description of VXZ
The investment seeks to replicate, net of expenses, the S&P 500 VIX Mid-Term Futures Total Return Index. The index offers exposure to a daily rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the fourth month VIX futures contract into the seventh month VIX futures contract.
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