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mramaswamy1
Registered: Nov 2009
Posts: 3 |
06-17-12 05:03 AM
How low can VXX go? Markets have to have some volatility. In spite of the contango effect, VXX cannot go to 0, can it? I am selling naked weekly SPY puts every week. I was thinking of buying VXX shares as a hedge against a market crash.
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Realistic
Registered: May 2012
Posts: 89 |
06-18-12 07:13 AM
Quote from mramaswamy1:
How low can VXX go? Markets have to have some volatility. In spite of the contango effect, VXX cannot go to 0, can it? I am selling naked weekly SPY puts every week. I was thinking of buying VXX shares as a hedge against a market crash.
VXX like many many other similarly constructed ETF's "GLD, SLV, UNG, USO, is extremely inefficient [i.e flawed]
Compare the various ETF's performance to their respective futures contracts: UNG/NG, USO/CL, SLV/SI, VXX/VIXX, etc...
The Contango effect is too great for anything other than short term trading, and even then I prefer the short side.
Regardless how low it may go, it never increases value proportionately, so you are at a disadvantage from the beginning...
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newwurldmn
Registered: Apr 2011
Posts: 2628 |
06-18-12 11:12 AM
Quote from Realistic:
VXX like many many other similarly constructed ETF's "GLD, SLV, UNG, USO, is extremely inefficient [i.e flawed]
Compare the various ETF's performance to their respective futures contracts: UNG/NG, USO/CL, SLV/SI, VXX/VIXX, etc...
The Contango effect is too great for anything other than short term trading, and even then I prefer the short side.
Regardless how low it may go, it never increases value proportionately, so you are at a disadvantage from the beginning...
This is not true. Vxx returned more than the sep future during the crash last fall. Vxx ralied like 250% vs sep future 215%.
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Realistic
Registered: May 2012
Posts: 89 |
06-18-12 01:32 PM
Quote from newwurldmn:
This is not true. Vxx returned more than the sep future during the crash last fall. Vxx ralied like 250% vs sep future 215%.
No Desire to argue, I did a quick general post, I should have stated Futures or the respective indices which the instrument attempts to track.
In General these instruments are inefficient, I am sure you will be able to find isolated instances to the contrary. [Contango implies rollover]
And by the title of the thread, "buy" implied longer term, which is what I was responding to.
VXX is also an ETN, not an ETF which has other additional inherent risks, i.e. credit, taxation...
VXX, TVIX, VXZ, etc... are all created to make money, not so much for you, but the issuing bank...
If one likes these instrument's, by all means trade them, just perform the due diligence and understand their liabilities...
I have traded them all and learned my lesson, there are better instruments available to trade...
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