Hedging with vix

Anyone have any experience with hedging with volatility?
I’m trying to hedge the current rally with vxx.

The more I research the vxx it may not be a good idea but it
seems like it has kind of a floor and the spikes seem pretty frequent. The midterm vix etf might be a better hedge.


If you are a member of SA, lots of discussion on this on Options board over last several weeks.

Also Lots on VXX board in Pro.

VXX is a better short than long in general.

UVXY, SVXY are options as ETF’s to use.

All these suffer from inverse strategy decay.

There are VIX options but you have to think carefully about their cost. In general buying options is a losing proposition, time is working against you.

Do you have specific idea or goal in mind?


1 Like

What exactly are you trying to hedge?

The problem with hedging is that when you hedge long term positions with mid-long term hedges you ofter end up muting returns, and sometimes losing on the hedge at the same time.

How would you hedge? With VXX, VXX or VIX options, UVXY or other VIX focused ETFs? Be prepared for market makers to mess with you there. Also you need to time your hedges correctly to be effective.

Now short term hedges can be effective, like say buying puts before an earnings release (or put spreads to remove volatility crush issues), and they serve their purpose. However longer term hedges tend to cost more than they help in my experience.

If the main goal is to smooth out the volatility of your portfolio and reduce risk, you could always just reduce some positions and hold a bit more cash.

Don’t fall into the trap where you try to make money off the hedges that are supposed to protect your portfolio from decline while also trying to make money from the upside in your holdings. It will test your focus and becomes counterproductive.

If you have intermittent short term items you want to hedge against, be ok with the hedge most likely being a cost that you are paying to have peace of mind.

In my opinion hedges work better when paired with short term trades than with long term holdings. There may be times when hedges make sense against a long term portfolio, but you do always have the option of selling and holding cash if you want to keep it simple.