VIX Volatility Model - Misc 3-7-16

Published : March 7 2016 at 11:48 ET

Note how 25 minutes after today's open, XIV still traded higher than its opening price despite the market trading lower than its opening price at that time.

In other words, profiting from volatility does not have to correlate 1:1 with stock market movements. Thus the market can back-and-fill even while selling volatility (buying xiv) can be profitable.

Also note that sometimes slippage can work in your favor. If you use Schwab as your broker and put in a premarket order to buy at the open, you may have bought XIV at 20.8 or 0.2% better than the actual opening price. Of course, this can also work in the other direction depending on market making conditions. 

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