tag:blogger.com,1999:blog-897456774486153841.post8288618306844877039..comments2024-03-29T03:46:10.767-07:00Comments on VIX and More: The XLF and the SPXBill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-897456774486153841.post-5967140908167001762008-03-04T23:52:00.000-08:002008-03-04T23:52:00.000-08:00One significant advantage that the VIX has over a ...One significant advantage that the VIX has over a sector XLF as a hedge for the SPX (or SPX-like portfolio), is that it's a general-purpose hedge.<BR/><BR/>And at some point the downtrodden sector will snap back and cause the hedger to miss out on bulk of the market rally, and possibly lose more money on the hedge than gain on the main portfolio.... for example, good news about Ambac could make the XLF rally harder and higher than the SPX.<BR/><BR/>Put another way, a sector hedge is not so much a pure hedging strategy as it is a pairs trade (and it has to be managed/timed as such), whereas a VIX hedge is more like catastrophic loss insurance. :)<BR/><BR/>tntUnknownhttps://www.blogger.com/profile/08973121802521561266noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-60454813670347024682008-02-26T00:10:00.000-08:002008-02-26T00:10:00.000-08:00Hi dowoper8tr,Frankly, I was quite surprised to se...Hi dowoper8tr,<BR/><BR/>Frankly, I was quite surprised to see the P/C numbers from Schaeffer. I expected to see a lot more evidence of long put activity.<BR/><BR/>The short action is not surprising and appears to have been the preferred way to play this one. As you point out, the dividend makes for a fair shorting hurdle, but I suspect that in terms of risk, the big boys have been looking at a much higher potential for significant gaps down than up (if so, they were right on target.)<BR/><BR/>I have no position in XLF and have preferred to play with fire directly here: MBIA, WM, LEH, COF, etc.<BR/><BR/>I also think that the bulk of the downside opportunity in financials has already passed us by. I'm looking at going long some foreign and regional banks right at the moment, FWLIW.<BR/><BR/>Cheers,<BR/><BR/>-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-60262924455885464412008-02-25T13:04:00.000-08:002008-02-25T13:04:00.000-08:00I tried to ask BZB but I'm not a goog blogger so c...I tried to ask BZB but I'm not a goog blogger so can you help me understand his info? P/C OI has fallen dramatically but shares sold short has risen rapidly--along with the trading volume of XLF. Doesn't that imply traders are opting for the 'riskier' trade against XLF by outright shorting (and suffering the dividend and the momo 7-8% days) rather than the more controlled risk of options? Sounds like a nice recipe for a well executed short squeeze. Cue Gasparino!<BR/>Thanks,<BR/>dowoper8trAnonymousnoreply@blogger.com