Wednesday, May 20, 2009

Record Volume in VXX

While all eyes were watching the VIX take a swan dive this morning, I failed to hear any chatter about the VIX ETN, VXX. Though admittedly not as sexy or as volatile as its index counterpart, VXX still managed to fall over 40% from its February high on the way to making a new all-time intraday low of 71.96 today, before rallying late in the session to finish the day with a gain of 1.32% and a close of 77.38.

What really got my attention, however, was today’s new record volume of 825,338 shares. Since VXX is less than four months old, traders are still getting up to speed on some of the VXX’s idiosyncrasies. Given that VXX cannot be shorted (at least in my accounts), there was very little in the way of speculative interest in this product while volatility was cratering over the course of the past 2 ½ months.

The key takeaway, however, is that today there was a record number of bets on volatility using VXX. I suspect I am not the only one who thinks we probably just saw a VIX bottom.

Today may also have been the first indication that VXX has the potential to be a superb speculative vehicle in addition to a hedging tool. With an average intraday range of almost 5% and daily change approaching 3%, VXX could even join the ranks of the triple ETFs as a preferred day trading vehicle. The VIX still has a long way to go before it becomes a staple of the trading community, but today was definitely a big step in that direction.

[source: StockCharts]

Disclosure: Long VIX and VXX at time of writing.

2 comments:

Cobra said...

Hi, Bill,

Thanks to you, the visits to my blog hit new high yesterday. Just want you to know that I've mentioned your blog in my today's report, hopefully it could bring more traffics to your site.

Cheers,
Peter

Charts and Coffee said...

I added VXX today. The VIX bounced right off support and a fib line and I jumped in at $72.50.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics