iPath S&P 500 VIX Short-Term Futures ETN (VXX)

[DrContango]

With all due respect, do you guys have any understanding of how this derivative works?


IMO, buying Jan calls now is not a wise decision.

Do ya'll understand contango???

VXX is a mathematical beast ruled by contango. And contango is the steepest that it has been in many, many months.

Do ya'll understand why Tuesday is a critical date for the VIX-proxies??? (VIX futures expire at 1615 that afternoon!)

Do you realize that the VIX can rise over 10% to as high as 13.5 by Tuesday afternoon and VXX will still fall another 1-2%?

Please study the chart below from vixcentral.com. It graphs the VIX futures curve. (spot VIX is dotted line). VXX at market close Tuesday will be based entirely on the price of Z3, December futures. Contango btwn Z3 and spot is an outrageous 20%.



Spot and front month must converge and expiry and, most likely, with spot so low, spot will mostly move up to meet November.

If spot remains at 12.10, VXX could fall another 10% just by Tuesday.

Meanwhile, you are speculating now anticipating that the debt crisis might heat up again by late December.

BUT contango between Devember and Jan futures is a robust 13%.

I've written a thousand times that if you anticipate a stock mkt correction the best play is to short a leveraged index ETP.

Stingray and I have explained these V-proxies ad nauseum on the UVXY board.

Regardless, good luck on your "investment".

Doc