Vxx & VIX futures performance

trading1 · Sep 17, 2012

How is it that the vxx is meant to track the front 2 vix futures and and it bears no relation to their movements?

Like now, the front 2 futures are both down 2.3%, 3.2% AND yet vxx is up 0.5% ?

This is NOT a question about vxx not matching the vix index (because of contango), vxx is meant to resemble the futures themselves, and yet it does not, why not, whats going on?

nazzdack · Sep 17, 2012

Quote from trading1:
----vxx....
----vix....
----no relation to their movements?
----whats going on?

1) The price correlation between the VIX and VXX is "only" ~80%. Divergent days will occur with some regularity.

2) On days when the SPY is ~unchanged, the divergence between the VIX's can be more apparent.

3) The congruity is "better" on large directional days.

loufah · Sep 17, 2012

The tracking is actually fine. The VXX net change you see is based on the price at 16:00 the previous day; but VIX futures' net change is based on the price at 16:15 the previous day. A lot can happen in those 15 minutes. There's often a movement of 1% to 1.5% in the few seconds before 16:15.

rallymode · Sep 17, 2012

Quote from loufah:

The tracking is actually fine. The VXX net change you see is based on the price at 16:00 the previous day; but VIX futures' net change is based on the price at 16:15 the previous day. A lot can happen in those 15 minutes. There's often a movement of 1% to 1.5% in the few seconds before 16:15.

True that. VXX is 95%+ in October right now. October futures got bid up about 50 cents after the 3pm close on friday which would account for the disparity between the closing prints. It was a 30 cent spike in the last few seconds alone.

trading1 · Sep 18, 2012

Quote from loufah:

The tracking is actually fine. The VXX net change you see is based on the price at 16:00 the previous day; but VIX futures' net change is based on the price at 16:15 the previous day. A lot can happen in those 15 minutes. There's often a movement of 1% to 1.5% in the few seconds before 16:15.

I appreciate your information and the reason behind it.

trefoil · Sep 18, 2012

VXX itself did spike in the time between 16:00 and 16:15 that day as well, in line with that spike in the futures.

ibrainch · Sep 18, 2012

If you are in Chicago, there is a VIX seminar next week hosted by the CBOE and Advantage Futures. More info and registration is here:

http://advantagefutures.com/events/event/why-trading-volatility-matters/

failed_trad3r · Sep 18, 2012

Because expiration and they liquidated their last September long vix future, leading to a loss. The loss is bigger factor on expiration than other days, for logical reasons.

i have a feeling you don't realize how big contango is. It's not 1 2 or 3 % loss per year. It's 10-20% loss PER MONTH

DeeDeeTwo · Sep 19, 2012

Quote from failed_trad3r:

Because expiration and they liquidated their last September long vix future, leading to a loss. The loss is bigger factor on expiration than other days, for logical reasons.

Why would that be a general case...
If the front month is rolled daily in a linear way by an equal amount.

So today you have expiration... is there any predictable behavior?

i have a feeling you don't realize how big contango is. It's not 1 2 or 3 % loss per year. It's 10-20% loss PER MONTH [/QUOTE]

VXX contango has averaged 11.35% PER MONTH in 2012...
With only 2 days of very small backwardation.

But this is somwhat unusual...
Since we've a 23.40 to 14.18 (39%) collapse in the VIX.

pistolpt · Sep 19, 2012

Quote from loufah:

The tracking is actually fine. The VXX net change you see is based on the price at 16:00 the previous day; but VIX futures' net change is based on the price at 16:15 the previous day. A lot can happen in those 15 minutes. There's often a movement of 1% to 1.5% in the few seconds before 16:15.

Bingo.

This is the answer to the original question. Period. Trust me.

Vxx & VIX futures performance

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