By Lawrence G. McMillan
One of the reasons that we favor $VIX derivatives as a portfolio, hedge rather than $SPX (or SPY) puts, is that $VIX is much more volatile. Also, $VIX protection is more dynamic. However, there can be some problems with the timing of a market’s breakdown and the convergence of $VIX derivatives with $VIX. In this article, we’re going to look at the details behind these actions, so that those who buy $VIX derivatives for speculation or protection might better understand what the potential problems are. We have addressed these topics in the past, to a certain degree, but not to the extent we will in this article...
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