Can somone give me one legit reason to why you should not be short VXX?
VXX
- Thread starter Anton Larsson
- Start date
Can you handle the volatility during the flareups when the market takes a hit? (60% from Sept/Oct of this year). VXX hasn't been around for that long: Jan 2009 = right before the kick off of a huge bull market.
VIX hasn't been around that long either and it's not exactly an apples/apples comparison, but it was there for the Credit Meltdown, so you can get some idea of the craziness that can happen. Nice slow downtrend punctuated by rip-roaring spikes.
VIX hasn't been around that long either and it's not exactly an apples/apples comparison, but it was there for the Credit Meltdown, so you can get some idea of the craziness that can happen. Nice slow downtrend punctuated by rip-roaring spikes.
I think shorting VXX is difficult at most brokerages. As mentioned above, VXX, as well as its intermediate term counterpart VXZ and several similar ETP/ETN/whatevers are a rolling weighted basket of VIX futures. Again, as said above, you can download the data for VIX futures and compute VXX back to like May or March of 2014 using their prospectus, or just this code (I've never used or tested) http://tradingwithpython.blogspot.com/2012/01/reconstructing-vxx-from-cboe-futures.html?m=1
I assume you probably are aware of all this, so the question of whether to short VXX is really the question of whether you are short VIX futures (in theory). That's a slightly different question with roughly the same answer. VIX futures have had like 40-50% 'decay' (if you will) annually historically, so that's enticing. You should probably hedge with SPY, ES, etc etc or have a tight stop if you wanna extract this negative roll in VXX though, because (as you can easily see), when the futures are in backwardation, the VXX can sometimes outpace VIX to the upside in the short term. VXX and VIX are definitely areas of interest for me though.
I assume you probably are aware of all this, so the question of whether to short VXX is really the question of whether you are short VIX futures (in theory). That's a slightly different question with roughly the same answer. VIX futures have had like 40-50% 'decay' (if you will) annually historically, so that's enticing. You should probably hedge with SPY, ES, etc etc or have a tight stop if you wanna extract this negative roll in VXX though, because (as you can easily see), when the futures are in backwardation, the VXX can sometimes outpace VIX to the upside in the short term. VXX and VIX are definitely areas of interest for me though.
How can you run an option consulting firm and ask this question in all seriousness?
Why short VXX when you can go long XIV.
Anyway you may think volatility is a short now but it doesn't take much to see volatility spike over 100% in a month. Its happened before and will happen again. Volatility jumps when you least expect it to. The market conditions of today have never existed before. These markets are not real, they haven't been real since the fed has propped them up ...once the real market starts to show up you are going to wish you never shorted the VIX.
Good points. XIV tends to hold its gains after drops in volatility, until the VIX starts to spike erratically, then VXX will have huge short term gains, before it begins to tank yet again, until it does a reverse split. Then the process repeats all over.
In any case, the VXX/XIV trade has been discussed on many threads. Some interesting points about the VXX are found here:
http://www.ipathetn.com/us/product/vxx/?success=0&searchTerm=vxx#/overview/correlations
