XIV (Daily Inverse VIX short term futures) trades opposite the VIX and VXX/UVXY and trades with the market for the most part, this is why I favor XIV for a short term move, but love VXX/UVXY for the bigger picture.
Even though I think ETFs like XIV will do well in the near term and I have been positioning long in these, the probabilities on the charts and leading indicators as well as breadth and a number of other indications all point to a very bearish outcome for this market, so even though I want to be nimble and play the market and take what it offers, I keep these positions at speculative size, which for me means half of a normal size position. If my normal risk management allows for up to 2% risk per position, speculative trades should represent 1% of less of total portfolio before leverage. This does not mean a 1% stop on the individual trade, you can have a 20% stop and still keep the portfolio risk to 1 or 2 %, it's all in position sizing. For more on this there are links at the top right side of the member's site.
Here's the SPY (green) vs XIV (red), note the positive correlation between the two, so when playing near term volatility I want to be in the inverse XIV.
Longer term and where the highest probabilities are, VXX or UVXY which gain when the market drops are my longer term picks for playing volatility, note the 4 hour chart's massive positive divergence. It looks like someone has been accumulating volatility in preparation for an event to come.
Near term however the VXX 5 min is both relative and leading negative
The 3 min is leading negative today
XIV by contrast in the range for this week as I talked about Monday and I believe Sunday, shows a 10 min positive divergence which is the right size divergence for this size range.
Intraday the 3 min chart is also leading positive, the opposite of VXX's leading negative on the same timeframe.
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