I have only sat on this thing for less than a year so I do not think I know much about it, just a general long term direction.
Can someone help me understand something. I'm serious.
VXX tracks the 2 front month futures. So April 18 and may 18 or there abouts. If I am a billion dollar or hundred million dollar fella and I believe volatility is coming, I do what this product does and buy the end month? But by buying the end month I drive up demand which drives up price which causes even more contango or decay?
I can not get my mind around this concept. The hedge you are placing works counterintuitive to the intended direction of this product. God I do not even know what I just wrote. It just seems absurd. What am I missing because I for sure am missing something.
It seems to me a lot like selling mortgage backed securities (if you buy the ETN) but the person creating the ETN shares are rubber stamping the Sub Prime as AAA before they sell it to you. We know how that turned out. This is the whole concept of why I am short, unless someone can set me straight?