Barclays stops doing VXX?

frostengine · Dec 30, 2016

What is the likelyhood that Barclays stops reverse splitting VXX and shuts it down, or closes the fund? i.e. VXX ceases to exist... Is that possible? Likely?

My concern is VXX is all I trade lately, have built a very robust and profitable system utilizing it. However, in the back of my mind, I have a constant worry that the gravy train will end in 6 months.. a year... or some time in the not too distant future due to VXX disappearing..

Thoughts?

Scataphagos · Dec 30, 2016

frostengine said:
What is the likelyhood that Barclays stops reverse splitting VXX and shuts it down, or closes the fund? i.e. VXX ceases to exist... Is that possible? Likely?

My concern is VXX is all I trade lately, have built a very robust and profitable system utilizing it. However, in the back of my mind, I have a constant worry that the gravy train will end in 6 months.. a year... or some time in the not too distant future due to VXX disappearing..

Thoughts?

"Things" change in the markets all the time.

Adapt or perish.

cdcaveman · Dec 30, 2016

They make money by managing it.. if interest stays high in it. There will be no reason for them to shut it down.. everyone loves shorting it . As if it's free money...

xandman · Dec 30, 2016

The contract does a ton of volume. The reason that product could go away is via regulation/re-classification due to the implicit leverage. I think it has value.

3x-2x leveraged products are the true rip-offs.

cdcaveman · Dec 30, 2016

xandman said:
The contract does a ton of volume. The reason that product could go away is via regulation/re-classification due to the implicit leverage. I think it has value.

3x-2x leveraged products are the true rip-offs.

There ya go... Regulation.... Where ever the state can keep the people from themselves

cjbuckley4 · Dec 30, 2016

xandman said:
The contract does a ton of volume. The reason that product could go away is via regulation/re-classification due to the implicit leverage. I think it has value.

3x-2x leveraged products are the true rip-offs.

Can you expand? How specifically are they rip offs? I'm aware that many investors fail to understand that they are 2-3x leveraged DAILY returns and wonder why their month long position didn't return 3x the underlying when it in fact did return 3x daily for the whole period, but aside from things that plague other ETPs like roll and occasionally poor liquidity I'm not sure how these products are necessarily worse than unleveraged products. Thanks.

xandman · Dec 30, 2016

cjbuckley4 said:
Can you expand? How specifically are they rip offs? I'm aware that many investors fail to understand that they are 2-3x leveraged DAILY returns and wonder why their month long position didn't return 3x the underlying when it in fact did return 3x daily for the whole period, but aside from things that plague other ETPs like roll and occasionally poor liquidity I'm not sure how these products are necessarily worse than unleveraged products. Thanks.

I think you articulated the issue far better than I would have.

That headwind is more than enough for me to dislike them. The returns follow the index and leverage is all too easy to get from other products. The reason I like the VXX even though it has the common ETP weaknesses is that volatility trades require several option contracts to structure the trade. Thus, it provides some value-add for the cost.

Compare trading a calendar/fly intraday vs trading VXX is a world of difference. The market leans on the b/a depending on the side that you are aggressing. Not so with the VXX...imho.

frostengine · Dec 30, 2016

cdcaveman said:
There ya go... Regulation.... Where ever the state can keep the people from themselves

If regulation is the biggest threat, that should be minimized for the next 4 years at least..

cjbuckley4 · Dec 30, 2016

xandman said:
I think you articulated the issue far better than I would have.

That headwind is more than enough for me to dislike them. The returns follow the index and leverage is all too easy to get from other products. The reason I like the VXX even though it has the common ETP weaknesses is that volatility trades require several option contracts to structure the trade. Thus, it provides some value-add for the cost.

Thanks for your reply. While I can see how the term "rip-off" may apply in terms of value added as you define it, its ultimately the traders responsibility to read the prospectus and understand these dynamics/potential for illiquidity, so if my understanding of the drawbacks is accurate, I'm comfortable.

Obviously, what you touched on regarding structuring positions with VXX/VX futures vs. SPX options and the value added is an important point. If you include the options the point you make is even stronger w/r/t getting vega exposure.

Scataphagos · Dec 30, 2016

xandman said:
The contract does a ton of volume. The reason that product could go away is via regulation/re-classification due to the implicit leverage. I think it has value.

3x-2x leveraged products are the true rip-offs.

"Rip-offs"?

There is a cost for vehicles which include leverage... same as if you borrow from your broker and have to have to pay "margin interest".... or paying option premiums... such investments are generally not designed for "long term, buy-and-hold".

If you feel you're being hosed trading 2X-3X ETFs, then you're expectations are wrong.