what would be the risk by shorting vxx?

T

trend2009

the VIX index is at 59 today, historically it can not sustain this high level for too long. in 2008, the highest point was 109, after that it went to 10. so since vix will move to 10-20 range in the future, is it a good idea to short vxx (which is 49) and hold for 1-2 years?

what is the risk of the trade shorting vxx at 49 since I am sure vix will go back to 20 within 2 years?
 
The vxx derives its price and value from rolling in the vix futures... If vix futures curve stays in backwardatiin for months and months the rolling of the vxx position will cause the value to increase all things equal
 
trend2009 said:
the VIX index is at 59 today, historically it can not sustain this high level for too long. in 2008, the highest point was 109, after that it went to 10. so since vix will move to 10-20 range in the future, is it a good idea to short vxx (which is 49) and hold for 1-2 years?

what is the risk of the trade shorting vxx at 49 since I am sure vix will go back to 20 within 2 years?
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Why would you try trading a vehicle that you clearly have no clue how it works?
 
firstly we don't know whether you are
heavy scalper,
day trading,
swing trading,
position trading.


secondly, we don't know your entry tactics / how you'd enter the trade /
under what condition would you enter the trade.

thirdly, you should be doing your own risk analysis.
 
Here's my recommendation... Short 20% of your allotted amount for the trade.. keep adding as it goes up until your 50% of your total allotment.. hold for 5 years. Done
 
cdcaveman said:
Here's my recommendation... Short 20% of your allotted amount for the trade.. keep adding as it goes up until your 50% of your total allotment.. hold for 5 years. Done
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What about his borrowing costs?
Or what happens if his shares become Hard to Borrow or get called in?

Of course VXX will be lower a year or two from now but it’s not that easy to profit from it
 
Given a choice, you should buy SVXY instead. You get to be short VIX index yet your loss is capped at the size of your investment. It’s hard to imagine VXX doubling from here, but it’s not impossible by any means
 
cdcaveman said:
The vxx derives its price and value from rolling in the vix futures... If vix futures curve stays in backwardatiin for months and months the rolling of the vxx position will cause the value to increase all things equal
More...


I must correct here... VIX derives price from SPY options (bold mine):
Wikipedia said:
VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
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https://en.wikipedia.org/wiki/VIX
 
If markets were to tank hard and VIX spikes up, you will lose alot. Nobody knows if markets will go down hard or not soon.
 
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