Replies to post #41022 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

I'm not sure I understand what you mean when you say long VIX and short VIX. Are these different symbols like VIXY

Yes ... different symbols. VIX is a mathematical volatility index. Some Exchange Traded Fund/Product/Note providers attempt to provide retail choices to actually invest in something like that volatility index, typically with those providers using Futures and/or Options to do so. You can either buy long or short versions of those ETF/ETP/ETN, similar to how some ETF's cater for buying into either long or short stock positions. Different providers name those products accordingly for example XIV is a inverse (short) VIX (cleverly named VIX backwards to XIV to indicate that), so you don't actually short their product, but rather they run short positions and package that up into a ETF/ETN/ETP for investors to buy into.

Most of the time Futures run in Contango, where it costs more to hold futures that expire further out in time. So if you're repeatedly buying (or rather the fund provider is on investors behalf) longer dated contracts to later roll those when they get nearer to expiry, then you suffer that Contango cost. Doing the opposite tends to be the better choice, by shorting the VIX via buying (long) a inverse VIX ETF/ETP/ETN, then that benefits from Contango - which at times can be sizable (5% difference between single months for instance). Over some periods however the situation can reverse and go into what they call Backwardation, where its less expensive to buy futures further out than it is to buy shorter term positions.