VIX/VXX trade idea

The positions I closed were on paper. I am thinking of going real for the next round.

 

Obvious downtrends tend to price into the options.

 

Real life drift will usually have very little representation in options, in a very indirect form only, such as change in borrow (an asset with an obvious downtrend is usually a popular short) and skew (since it is a popular short, again).

 

I wonder if the changing degrees in that skew that is in popular shorts says anything about the life of the trend....

 

Opened another position:

Long 2 VXX Jan13 28 put @1.58
Short 3 VIX Jan13 16 put @1.10

Total credit 1.10*2 - 1.58*3 = 0.14

Same assumptions as in the last month: VIX stays above 16 while VXX keeps moving down.

 

So hows that working out for you today 12/21/12?

 

As of this writing:

VXX 28 put is .52 (loss (1.58-0.52)*2 =2 .12)
VIX 16 put is .40 (gain (1.10-0.40)*3 = 2.10)

Total: loss .02

 

Give it up.

 

Why? Even if both puts expire I get to keep .14 credit.

 

There's some constructive criticism