Why are you guys looking to trade the VIXY and not the VXX? It's about 10 times more liquid.
IMO buying VIX instruments could end up being a massive suckers play. I'd be very careful buying, unless it's to hedge a bullish portfolio, or used as a day trading vehicle.
"How can I use the VIXY and the SPXU? Perhaps later this week open long trades in both of them. Then if I get the SPXU long trade entry wrong, the VIXY trade may compensate for it, but if the SPXU takes off, perhaps the VIXY will take off as well for a win - win scenario."
I don't see how this would work, if you were long VIXY/SPXU and you were wrong and the market pushed up further, then they would both move against you. If markets move sideways then you're just as likely to be winning more than you're losing- since how do you know if you've weighted the trades correctly? You need to be using some kind of computational model.
" Consequently, if a trader expects the SPX to behave erratically for several months, but with no clear trend up or down, then a long trade with the VIXY could be the solution. Anybody agree?"
No, if SPX trends sideways, VIXY could just move sideways aswell. The VIX doesn't measure volatility in the traditional sense, it measures implied volatility. You need the markets to move down.
I think it would be difficult to profit from any correlated arbitrage trade aswell, since you're competing against algos using computational models/ machine learning, therefore the markets are so efficient that there's little room to profit off spreads from different inversely correlated instruments .
