tag:blogger.com,1999:blog-897456774486153841.post2936720291179957670..comments2024-03-18T03:31:52.739-07:00Comments on VIX and More: VXX Calculations, VIX Futures and Time DecayBill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-897456774486153841.post-87130935403194965512010-02-22T12:07:10.476-08:002010-02-22T12:07:10.476-08:00Thanks for the comment, Robert. By the way, your ...Thanks for the comment, Robert. By the way, your blog is off to a great start and promises to be a must read for all serious students of the VIX.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-41716314192804257652010-02-22T12:00:52.006-08:002010-02-22T12:00:52.006-08:00Historically the VIX term structure is upward slop...Historically the VIX term structure is upward sloping so VXX will lose value over time.<br /><br />Are there any uses for VXX beside speculating on the short term VIX changes?<br /><br />You can use VXX to delta hedge your short VIX call option position.<br /><br />See: http://volatilitysquare.blogspot.com/2010/02/vxx-and-term-structure-of-vix.htmlRoberthttps://www.blogger.com/profile/02265486123983837708noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-81234145724463999322009-10-26T08:45:30.887-07:002009-10-26T08:45:30.887-07:00Guru,
Good questions.
The short answer is that i...Guru,<br /><br />Good questions.<br /><br />The short answer is that in February and part of March, volatility was doing very strange things and the VIX futures were in an unusually strong backwardation position for a fair amount of the time, which is rare.<br /><br />In the last 6 1/2 months, the VIX futures reverted to their more normal contango relationship. During that period, the VIX has fallen 39% while VXX has fallen 60%. My contention is that the February to March period will turn out to be a historical anomaly.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-82823654134531483052009-10-24T02:47:41.818-07:002009-10-24T02:47:41.818-07:00Bill, I overlaid VXX on top of VIX and found that,...Bill, I overlaid VXX on top of VIX and found that, over the long-term (from Feb 1 to yesterday), the two tracked fairly closely (see http://tinyurl.com/VIX-VXX-Comparison). While on a daily basis the you may lose with the VXX as compared to the VIX but the gap is closed if you are able to hold long enough.<br /><br />If the VIX starts going up (to say 40) then wouldn't it be far to say that VXX would ultimately catch up before the VIX turns back down?<br /><br />What am I missing here?Joehttps://www.blogger.com/profile/15672518604933082585noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-43525419260160283672009-05-08T14:23:00.000-07:002009-05-08T14:23:00.000-07:00i disagree with anon. the contango could diminish...i disagree with anon. the contango could diminish NAV of the futures based etfs. this is really nothing new... try USO forums and read all about contango issue they had since last year. USO at the current price last year had much lower crude oil spot price. although the futures based etfs are not explicitly leveraged, they could lose NAVs over the time just like leveraged etfs.stonebathttps://www.blogger.com/profile/13067880752297712041noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-38998814119578375252009-05-08T12:39:00.000-07:002009-05-08T12:39:00.000-07:00Thanks for the interpretation, anon. I'll have to...Thanks for the interpretation, anon. I'll have to read the prospectus again for a third time. The methodology was not clear to me after the first two passes.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-59837553579864539812009-05-08T10:43:00.000-07:002009-05-08T10:43:00.000-07:00I am a huge fan of this blog. However, I do not t...I am a huge fan of this blog. However, I do not think that contango and backwardation affect the VXX. The rebalancing is done such that an equal dollar amount is rolled over. For example, if one month vix was 40 and two month vix was 20, then two units of two month vix would be purchased for every unit of one month vix sold. As long as hypothetical one month vix remains at 20 and two month vix remains at 40, the VXX should not change. The prospectus confirms this calculation methodology and also states that it was designed to prevent contango/backwardation from affecting the VXX price. Thanks for all of your useful help on this blog.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-48348704715686545262009-05-08T10:00:00.000-07:002009-05-08T10:00:00.000-07:00yeah... contango issue. no luv for vxx. it doesn...yeah... contango issue. no luv for vxx. it doesnt even look like good hedging tool. spike in vix must exceeds market's expectation for vxx to become truly hedging tool. if vix stablizes... vxx will continue to slide because of the rollover cost.<br /><br />vix options is better hedging tool. im still waiting for vix to go below 30. 27.5? 25?<br /><br />technicals might flash very strong sell or buy signal all over... but i just need to keep my power dry. you know... let it run for a while. there must be millions of investors like me who spotted the strong signal. i really hope they did... because i always wanna be standing next to them. but they could have been the other side of the strong signal when they spotted it. they gotta pump or plunge the markets to close their current positions and switch to the other side. sometimes it takes as short as a day... or as long as a couple of months. the current rally has been very strong. so i expect it should take AT LEAST a couple of weeks. suppose this is the first week of the unwinding process. next week is 2nd... and its OE week. then the following week is 3rd.<br /><br />theres... really no reason to hurry and take a position as soon as fresh new trading signal is flashing.stonebathttps://www.blogger.com/profile/13067880752297712041noreply@blogger.com