Vxx & VIX futures performance

Discussion in 'ETFs' started by trading1, Sep 17, 2012.

  1. How is it that the vxx is meant to track the front 2 vix futures and and it bears no relation to their movements?

    Like now, the front 2 futures are both down 2.3%, 3.2% AND yet vxx is up 0.5% ?

    This is NOT a question about vxx not matching the vix index (because of contango), vxx is meant to resemble the futures themselves, and yet it does not, why not, whats going on?
  2. 1) The price correlation between the VIX and VXX is "only" ~80%. Divergent days will occur with some regularity. :cool:
    2) On days when the SPY is ~unchanged, the divergence between the VIX's can be more apparent. :)
    3) The congruity is "better" on large directional days. :D
  3. The tracking is actually fine. The VXX net change you see is based on the price at 16:00 the previous day; but VIX futures' net change is based on the price at 16:15 the previous day. A lot can happen in those 15 minutes. There's often a movement of 1% to 1.5% in the few seconds before 16:15.
  4. True that. VXX is 95%+ in October right now. October futures got bid up about 50 cents after the 3pm close on friday which would account for the disparity between the closing prints. It was a 30 cent spike in the last few seconds alone.
  5. I appreciate your information and the reason behind it.
  6. VXX itself did spike in the time between 16:00 and 16:15 that day as well, in line with that spike in the futures.
  7. ibrainch

    ibrainch ET Sponsor

  8. Because expiration and they liquidated their last September long vix future, leading to a loss. The loss is bigger factor on expiration than other days, for logical reasons.

    i have a feeling you don't realize how big contango is. It's not 1 2 or 3 % loss per year. It's 10-20% loss PER MONTH
  9. Why would that be a general case...
    If the front month is rolled daily in a linear way by an equal amount.

    So today you have expiration... is there any predictable behavior?

    i have a feeling you don't realize how big contango is. It's not 1 2 or 3 % loss per year. It's 10-20% loss PER MONTH [/QUOTE]

    VXX contango has averaged 11.35% PER MONTH in 2012...
    With only 2 days of very small backwardation.

    But this is somwhat unusual...
    Since we've a 23.40 to 14.18 (39%) collapse in the VIX.
  10. Bingo.

    This is the answer to the original question. Period. Trust me.
    #10     Sep 19, 2012