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
Thanks Shortie, yes even though vol is sticky, but vix should be dropping by now. Does anyone has an explanation for this ?
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 ?
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
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
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 ?