VIX Workshop

Several volatility trading strategies advocate using a “core” short volatility position to benefit from the drag of contango and beta slippage on these products. Holding a permanent short position in UVXY would allow a trader to benefit from the average 60-90% yearly loss these funds suffer from. However, establishing or maintaining this permanent short position may be undesirable due to short borrowing fees, margin requirements, or even impossible if the shares are unavailable either due to market conditions or choice of broker. But just because you can't short UVXY or TVIX directly doesn't mean you need to miss out on these downward moves year after year. Consider building your core with options. This trade involves selling short calls. The premium collected on the trade approximates how much one would earn from the average natural decay of holding the underlying ETF in that period of time. This trade has the advantage of being much less volatile than a pure UVXY sh