TVIX (2x VIX Short-term ETN) offers an objective, yet aggressive entry here near the bottom of this 60-minute bullish falling wedge at the $VIX has fallen to support on the daily time frame and will be added as an official Long Swing Trade around current levels.
TVIX 60-min Feb 4th
Among other factors, such as the technical posture of the major stock indices, which still indicate an impending correction is likely, $VIX (CBOE Market Volatility Index) has fallen to the bottom of a well-defined support zone where the odds are good for at least a minor bounce. As one can’t trade the $VIX directly, that only leaves VIX futures, options on the futures, or the ETN’s & ETFs that invest in the futures contracts, such as TVIX. Another alternative proxy for a trade on the short-term VIX futures would be VXXB, which replace the recently expired VXX ETN from the same provider.
VIX daily Feb 4th
The price targets for this trade are T1 at 47.97 and T2 at 55.50. I believe that the very attractive R/R of 5:1 (i.e.- a ~50% profit potential if the final target is hit vs. a ~10% loss if stopped out) makes up for the above average risk of failure, as this is clearly a counter-trend trade without any buy signals on TVIX at this time.
The suggested stop is any print at or below 33.52 with a suggested beta-adjusted position size of 0.35. The substantial position size reduction helps to account for the 200% leverage in additional to the above average price swings in the $VIX relative to the stock market. The 0.35 beta-adjust position size would effectively result in a gain of about 17.5% of T2 is hit or a beta-adjusted loss* of about 3.5% if stopped out.
One final consideration for this trade is that it should be considered highly correlated with the QQQ Active Short Trade although technically speaking this is a LONG swing trade and will be categorized as such. Therefore, those short the major stock indexes and/or any other sector ETFs or stock that are highly correlated with the broad markets should factor that into their position sizing as to keep their total net long or net short exposure within their portfolio in line with their risk tolerance & outlook for the markets.