How low can VXX go? Markets have to have some volatility. In spite of the contango effect, VXX cannot go to 0, can it? I am selling naked weekly SPY puts every week. I was thinking of buying VXX shares as a hedge against a market crash.
VXX like many many other similarly constructed ETF's "GLD, SLV, UNG, USO, is extremely inefficient [i.e flawed] Compare the various ETF's performance to their respective futures contracts: UNG/NG, USO/CL, SLV/SI, VXX/VIXX, etc... The Contango effect is too great for anything other than short term trading, and even then I prefer the short side. Regardless how low it may go, it never increases value proportionately, so you are at a disadvantage from the beginning...
This is not true. Vxx returned more than the sep future during the crash last fall. Vxx ralied like 250% vs sep future 215%.
No Desire to argue, I did a quick general post, I should have stated Futures or the respective indices which the instrument attempts to track. In General these instruments are inefficient, I am sure you will be able to find isolated instances to the contrary. [Contango implies rollover] And by the title of the thread, "buy" implied longer term, which is what I was responding to. VXX is also an ETN, not an ETF which has other additional inherent risks, i.e. credit, taxation... VXX, TVIX, VXZ, etc... are all created to make money, not so much for you, but the issuing bank... If one likes these instrument's, by all means trade them, just perform the due diligence and understand their liabilities... I have traded them all and learned my lesson, there are better instruments available to trade...
Because VIX ETFs may have inefficiencies that can be exploited... Or fairly large spreads that can be captured. If you are ** trading ** Volatility... Then you should be scalping from a well-hedged Porfolio... In which case all these ETFs can be held long term. And yes... VXX is designed to go to ZERO... Only periodic reverse splits prevent it from doing so.
I agree with you. They aren't good instruments to trade and the down drift as a result of the futures roll is toxic. I just took exception to the comment "they NEVER..." because they can serve a purpose. Still doesn't mean that they are a good investing vechicle or that the world is better because they were created.
Mr logic, I never stated superiorty, I just commented on the fact that they aren't strictly inferior. And one example is enough to disprove "always."