$spx and $vix sufficiently correlated to use TVIX for hedging?

December 17th, 2014, 07:10 AM

Is that $VIX sufficiently correlated (inversely) with the $spx to use TVIX or something like it as a good hedging tool?
And how do you actually hedge the market? Do I wait for the $VIX to be really low and then buy and hold as sort of insurance policy for some big down move I get caught in?

I just started thinking about hedging. Mostly because I just happened to find TVIX recently. It seems that rather than using some sort of options strategy you could use the TVIX without paying a time premium. You might lose a little leverage, but it seems to have some advantages.

Also then the queston is how much to hedge? If using standard money management techniques of limiting loss to 1% in any one position. Does that mean I should off set that amount equally in the hedging instrument? So If I on average have $ 100 at risk would I want to own 100 shares of TVIX and assume a kick to the downside will move it 1 point.

Thanks for any thoughts on TVIX, or any kind of inverse EFT hedging.

December 20th, 2014, 05:57 PM

Let me guess. Nobody hedges.

$spx and $vix sufficiently correlated to use TVIX for hedging?

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$spx and $vix sufficiently correlated to use TVIX for hedging?