With Europe and European financial institutions under pressure this morning and the SPX futures down more than 3% about ten minutes before the open, investors will likely be looking for some portfolio protection in today’s session.
Normally, I would be thinking about VIX options here, but since today is the last trading day for February VIX options (which expire at the open tomorrow) and March options will not provide the same level of juice, this might be a good time to look at VXX, the short-term VIX ETN that is based on VIX futures.
VXX does not have much of a track record so far, but it has been moving at about 75% of the rate of the cash/spot VIX. If the SPX were to drop 3+% today, I would expect VXX to gain in the area of 10%.
Also, today should be a good day to see if VXX volume provides clues about market sentiment. Eventually, VXX volume peaks should provide some bullish contrarian sentiment clues, but it is too early to be able to get a good read on these as of yet.