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iPath S&P 500 VIX ST Futures ETN Message Board

  • xylther xylther May 2, 2012 2:10 PM Flag

    Shorts: be careful

    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.

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