Shorting anything is not passive, as it involves theoretically unlimited risk. The point of VXX is that it's passive. Sorry that despite your amazing day job you missed that. You talk about being sophisticated yet you talk about SH, which as I already stated tracks the *daily* inverse, which is totally useless as a long term exposure.
You need to stop pretending you know more than you do and do some research. The long term inverse relationship between S&P 500 and SH is -- DESPITE the daily compounding and CYA disclaimer from ProShares -- WAY better than the short term tracking of VIX by that stupid VXX you think is so great. <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2710416>
Oh yeah... this is real good -- NOT!!!! <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2710419>
There is a big difference in the cash VIX and the VIX futures. The VXX is designed to track the latter. There is no reason the cash VIX and futures should track, except in a very rough way.
Just don't expect to wake up to a 1987 meltdown and hit the lottery if you have VXX. Imagine calling up to celebrate at the most expensive restaurant to celebrate your 50% one day drop and find that the VXX moved 5%.
I think if you read $costaveragemans past posts you would probably eat crow. I have never seen someone so unsophisticated make so much money.
Your insults directed at a poster who obviously knows 10x as much as you expose you as a piker and complete amateur. Welcome to my ignore list, fool.
I think this discussion has run off course a bit. My original point takes into consideration that this etf is supposed to track vix short-term futures, rather than the spot VIX. And that it seems to be straying from even what one should expect were it dealing with a vicious contango situation. The point, were it to be working as well as could be imagined, would not be a proxy for a more effective SH. VIX does not necessarily rise as stocks go down. It rises as insurance is bought for core holdings. So it rises as emotional or panicky selling takes hold, rather than straightforward distribution. At this point, as a hedge when you think funds are still holding or buying, it does not seem to be accomplishing its goal. Even if you take into consideration the contango and the daily rollover, it is lagging by an unreasonable amount precisely when it should be making up ground. Unless someone has an argument that takes all of these points into consideration and offers a reasonable argument (like for example, how a little contango could result in lagging by 10-15% per day on key days), then I think this is simply a flawed instrument, that must prove itself in action, and that maybe, just maybe, there's more going here.
More specifically: "The price of a VIX futures contract is to VIX what a thirty-day forward interest rate is to a thirty-day spot interest rate." http://cfe.cboe.com/education/vixprimer/Basics.aspx And VXX "offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500® Index at various points along the volatility forward curve." http://www.ipathetn.com/VXX-overview.jsp