I typically prefer to buy ETFs rather than options. I find the bid ask spread easier to manage and liquidity keeps things simple. However, I do occasionally worry that my broker will stop allowing certain ETFs I use in my IRA accounts because they generate K-1 forms. Fortunately, some of those ETFs such as VIXY can be replaced with VXX, which has no K-1 form. However, should my broker ban SVIX, I then need a new way to short vol inside my IRA accounts. I could of course switch brokers. For example in my HSA at Schwab and my IRAs at Interactive Brokers I am able to trade SVIX without a problem. Hopefully they wouldn’t both change policies at the same time.
Should they do so, I am also working out the intricacies of replacing SVIX with VXX put options. This doable in theory, but there are some intricacies that do need to be taken into account. This is why I started a new strategy at collective2 that simulates doing this. Trying this at C2 is a pretty conservative test because C2 always buys with market orders. Therefore all trades take place with buys at the ask and sells at the bid – except for if the leader is using broker transmit. This creates a pretty big drag on the strategy. Therefore, if I can successfully do this at C2 I feel confident I can do it with real money should the need arise.
This is a link to the strategy.
Disclaimer
This is not investment advice. This website is designed to talk about investments but it is not designed to give you personalized investment advice. This site is generic and should not be used as the basis for any investment decisions. This is for entertainment and educational purposes only.
The owner of PatienceToInvest.com is also a trade leader on Collective2.com. We may receive compensation by promoting some collective2 strategies over others.
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