I've made a killing shorting this thing, but I've reduced my position significantly. All shorts need to remember what happened last year--VXX went from 20 to 50 quickly, and many shorts got completely wiped out. That kind of upward move does occasionally happen, and you need to be prepared for it.
Further, economic data has been declining while realized volatility has been trending upward. Spot vix doesn't really have room to fall from here unless realized volatility trends downward again, and that's more likely to happen if economic data is good.
Sure, you can try to keep benefiting from contango, but contango exists because of the risk of spikes, and the risk of a spike appears to be somewhat elevated now. Now is just not a great time to be consistently short VXX.
I am shocked at how far VXX has jumped of recent. No fear, but market just down significantly every day.
I hope we don't have a true panic selling day, VXX will spike higher than I originally thought.
One thing I am sure of though. Unlike many stocks that you buy and hold long, then one day you see headlines suggesting an accounting fraud suspected, and the stock tumbles to levels that will never allow you to recoup losses. With VXX, trading on the short side can be a frightening ride, especially during panic in the market, but as sure as the air you breathe keeps you alive, VXX will go down over time. Just have to watch the way you handle the spikes (no naked calls), avoid over exposure, and try not to panic!
The S&P would have to fall 200 points from here to be anything like 2011. I think shorts have a legitamate case too. The market is oversold and this downturn could fizzle out soon. Greece might have a smooth exit and maybe the Spanish banks get bailed out by the EU or IMF. I would say the chance is 50 to 50 shorts versus longs here.
I just do not agree with that. In 2011, VXX low was 20, then it surged to 56 on Oct 3rd. This year, VXX is low has been 16, so hypothetically another surge could send it to 45. Voltality would have to be above 30 for a while for this to happen. Right now, Vix went above 24 today. Historically in the last 2 years that has meant a move to 30 could occur soon. However, anything is possible.
The higher VXX goes, the more frightening it is to short. Hard to time the market.
Some traders dollar cost avg when market goes against them, and tends to pay off over the long run. Most cannot time the market consistently, but even I get lucky every now and then.
I always like to have some skin in the game. Never know what might happen, like gold and silver today. Has been falling like a knife, but instead of selling my shares of SLV, I doubled up yesterday, and even bought some uslv, and the rally in the metals today offset some of the losses that I had from my VXX puts.
Now I can take profits on my slv trade, and hold on to my VXX puts until the spike in VXX deflates.
There is nothing like trading an etn that even if you get the direction wrong, you know it will pay you back, and a profit, as long as you stick with the short side, and hold on!
VXX may be lower at the end of the year, but I just don't see the short-term risks as worth staying significantly short for the time being. With spot VIX and futures at relatively low levels right now, there's just less downside available from here than there was a couple of months ago.