[id00]

Yeah, all strategies with things like that work very well until they don't.

Odte situation reminds me of retail investors discovering $XIV, having a good time using "safe" strategies and then getting wiped clean by the volatility spike in 2018

[OutOfHere]

If it didn't work, of course I wouldn't use it. Duh.

The only way to survive in the long term is to become a part of the ecosystem that delivers more value more than it extracts. This is not impossible.

Moreover, the analogy with XIV is 100% bogus. There is nothing safe about 0DTEs. If you knew the first thing about 0DTE, you would know that it is held very selectively, not like XIV. A good number of the 0DTEs get wiped to $0 every day, not once in ten years. XIV was unforgiving just once; 0DTEs are unforgiving as a routine. Also, the logic behind inverse volatility offerings has been updated to mitigate the risk of what happened, not that it holds any relevance to this discussion.

[verteu]

If they are long options (most likely for retail), their position is convex and benefits from volatility. It's precisely the opposite of holding $XIV.

[id00]

My comparion was about people often using risky products without fully realsing their risk

[kqr]

Why would one choose to be long an inverse volatility instrument? How is that in any world safe?

[verteu]

Look at the total returns of VXX and you'll see why it's tempting to take the opposite position.

There are plenty of reasonable arguments to short vol, eg: https://www.nomura.com/events/9th-annual-global-quantitative...