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trading1

Registered: Jan 2006
Posts: 273

09-17-12 07:54 PM

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?

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nazzdack

Registered: Jul 2004
Posts: 8412

09-17-12 10:09 PM

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.

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loufah

Registered: Nov 2001
Posts: 1129

09-17-12 10:44 PM

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.

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rallymode

Registered: Dec 2005
Posts: 1325

09-17-12 11:12 PM

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.

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trading1

Registered: Jan 2006
Posts: 273

09-18-12 06:45 AM

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.

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trefoil

Registered: Mar 2007
Posts: 3383

09-18-12 05:27 PM

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.

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