How to tell where the $VXX will go?

How to tell where the $VXX will go?


$VXX is going to move somewhere.  That is for sure.  Just last week around this time the ETN was hovering about $26 and going nowhere fast.  The VIX October future premium was huge, the highest if not the highest level in 2018 for this close in the cycle.  Why does that matter?  Why does VIX future premium matter to VXX?

$VXX buys $VIX futures

There are many blogs and articles on $VXX and futures and decay across the web.  For this blog we just need to know that the $VIX futures move $VXX.  If you want to trade the product, take our VXX Made Easy course.  VIX future action is a combination of many things, time to expiration, slope of future curve, absolute VIX level, realized volatility etc. etc.   What we have had over the last several days is the $VIX cash moving much more than the $SPX close to close.  The $VIX cash jumped above all the $VIX futures for a 1% move in $SPX today.  That is squirrely for intra-day $VIX as we touched $18.  The $VIX futures moved enough to get $VXX above the $30 but that is it.  Not much considering we went into a backward to cash curve shape for every future.


Charts by TradeHawk

What does this all have to do with anything?  The recent $VXX low was $26 and the new high is $30.  Not much considering $VIX went from 11.5 to 18 over the same period.  Much of volatility trading is understanding relative movement.  $VIX, and $SPX volatility, is pumped with the equity market not really going anywhere, yet.   $VIX thinks the market is going somewhere and given the Oct backwardation it appears that it will happen quickly.  To me the simple trade is to make sure one chooses a position that makes money at $30 $VXX or $26.  Volatility is usually a better trade once things get moving but pure direction right now for volatility can be anywhere.

Our next Saturday Class on trading Weekiy Options is here.

Disclosure: VIX, VXX, SPX positions

Follow Mark@optionpit

Follow Andrew@optionvol

Leave A Response

* Denotes Required Field