How is VXX intraday price determined?

Discussion in 'ETFs' started by breeze, Feb 15, 2011.

  1. breeze


    Does anyone know how the VXX intraday price is determined? And how VIX futures (front and second month) affect the VXX intraday price?

  2. breeze


    Since no body replied, let me ask this question in another way - is the intraday price of VXX purely driven by supply and demand? Or is it also related to VIX future price?

    I understand price of a stock is purely driven by supply/demand, but should be different for VXX type of ETFs. It would be very appreciated if anybody can tell me how exactly the VXX price moves up/down by supply/demand and at the same time also related VIX future price.

  3. It is related to VIX prices and is not a subjectively priced asset as would be the price of Pepsi or other equities. There's more information in the prospectus, though I'm not sure if it has exactly what you're looking for. Hope this helps.
  4. heech


    I don't believe that's correct. VXX is an ETN, and price at any given point is subjective and based on supply/demand for the *note* itself.

    At settlement, the note is priced according to VIX futures (as described in the prospectus)... and for that reason, you can expect someone will be out there arbitraging + maintaining a relationship between VXX and VIX prices over time. But I'd expect that relationship to be somewhat flexible.
  5. True, I guess the point I was trying to make is the price of the ETN is based on a measurable formula based on VIX whereas that's not necessarily the case for equities.

    Would it be better to say VXX is a derivative of VIX futures whereas equities are not derivatives? Meaning VXX is less impacted by supply/demand forces than non-derivative assets (because of the arbitrage relationship you mention).
  6. breeze


    For example, right now, the ES is up by .55% and VXX is up by .46%. Usually whey ES goes up, VXX goes down. Somebody is keeping the VXX price to the Vix future price. Looks like supply/demand is not a big factor driving VXX price.

  7. tomk96


    just sell it, it pretty much only goes down. i believe the VXX uses the front two VIX futures contracts. they need to pay to roll them right now and have had to pay for a long time. that's why the price of the VXX keeps going lower in addition to vol going lower.
  8. Most of the "tracking" ETF's and ETN have horrible long term results.

    Look at the correlation of USO with oil prices and UNG with natural gas.

    Can't remember the exact numbers, but oil was up around 20% in 2010 and USO was DOWN 3%.

    Most of the idiots on CNBC tout them as great holdings for the average joe if they "want exposure" to a specific product. I've yet to hear any of them mention how badly they actually work.

    It's also the main reason why so many of them are hard to borrow. The big houses relentlessly short the balls off them and hedge in the "real" market.
  9. There are so many mistakes and misunderstandings in this post, it's hard to know where to begin.
  10. so what exactly does this have to do with the intraday prices of VXX? it's like someone asking about which airline provides the best service and you reply that the car rental counter at LAX is really slow. wtf
    #10     Feb 22, 2011