Massive VXX implosion is possible today

Discussion in 'Trading' started by shortie, Aug 11, 2011.

  1. VXX 34.4 right now
     
  2. my rationale is that VXX is around where it opened today while SPY has gained >1% since Open. VXX is around the most recent high, while SPY +5-7% from its recent low (not sure what the low recently was AH).

    Thus, we have some extra fear aka "the wall of worry" for the market to climb
     
  3. SPY 115.6 (+0.3?), still VXX 34.4
     
  4. Thanks for the tip. With stocks up I'm surprised it hadn't dropped more.
     
  5. gmst

    gmst

    Thanks Shortie, yes even though vol is sticky, but vix should be dropping by now. Does anyone has an explanation for this ?
     
  6. I thought volatility reflects pace of change, not direction. If markets spiked up suddenly, wouldn't VXX go up ? Or am I misunderstanding something here ?
     
  7. VXX is not the spot volatility rather it is a trading instrument loosely connected to VIX which is the projected volatility 2(?) months away. does a spike up in the market today indicate we will have the same level of volatility as in the last few days? of course not. so there must be some other explanation for VXX persistence
     
  8. From Wikipedia:
    That it hasn't fallen more says that the options players are still fearful.
     
  9. of course i could be putting the buggy in front of the horse and VIX (VXX) is the one that is correctly priced and essentially says that SPY spike up is total BS and the market will keep crashing (=staying volatile) for some time to come
     
  10. I'm very familiar with options; basically an increased VIX would indicate option sellers want more premium to make up for the increased risk of rapid one way movements in the market.

    The source of confusion for me is Shortie continually relates higher VIX levels with rapidly falling markets. While that might be the case most of the time, I always thought it worked in both directions. Why would call sellers want to sell cheaply if the possibility of a sudden market rise was heightened ?
     
    #10     Aug 11, 2011