Just one week ago, I posted an earlier version of the graphic below in VXX Juice Factor and Portfolio Insurance Implications. In that article, I explained how daily percentage price changes in VXX (what I call the VXX juice factor) had been running at the rate of about 70% of the changes in the VIX. This was in sharp contrast to the 35-40% my modeling of historical data had led me to expect when I published VXX Tracking VIX at 80+% Today the previous week.
Now, after 22 days of trading, the actual data for VXX have converged with my model and expectations.
Here is a quick summary of the first 22 days, with some takeaways that should prove to be helpful going forward:
- The median one day percentage change in VXX has been approximately 35% of the change in the VIX
- 77% of the time the two volatility measures have moved in the same direction (with divergences limited to days in which the percentage changes were small)
- 14% of the time VXX made a sharper move than the VIX (again, only on days with relatively small changes)
- On the three days the SPX has dropped more than 4%, VXX has moved 37%, 52% and 76% as much as the VIX, for an average of 55%