I don't understand this- the market is now just about unchanged for the 2 days having given back almost all yesterday's rise- but VXX after being down 8% yesterday is only up 2%? I know I sound stupid not understanding this- but if someone understands why and can explain to me, thanks so much!
It's as simple as this... Market's finding support and gaining strength, weakness is being shaken out of the market in preparation for the next leg up, and fear aka volatility is subsiding as uncertainty is leaving the market.
Because it's volatility. Event risk was taken out - first yesterday (ADP), then today (BLS release).
Add to that a little time value implied in the futures and you have a receipe for this to happen.
Everyone thinking it's a scam doesn't understand the concept of implied volatility well, even for short-term trading (longer term it's a $0 just like they say.)
Don't worry, this ETF is a fear indicator and doesn't track the market. Sit tight, all the bozo's who have been shorthing this thing along with the market makers will soon be buying this puppy hand over fist. Just remember, nothing goes in one direction forever. Look at the long term chart, this oversold ETF will have it's day very soon, right after elections or maybe when the public realize our government is competely BROKE!!
Funny how you say look at the long term chart... You just proved why this is not something to hold long. If you were intelligent enough, you would notice it has gone down indefinitely and is near its all-time low and continues to make all-time lows. This will not retrace. It is not mean reverting. The effects of contango decay permanently eat away at NAV, so the only way for this to ever retrace to previous levels is if backwardation is present for a significant amount of time. But if knew the nature of VIX futures, you'd know that they are in contango 90-95% of the time. So in actuality, not just theory, this does go down forever (thus the reverse splits every few months).
that's why VXX is a great short. On market up days it gets killed. When the market goes down it sometimes still goes down or barely goes up at all. Lets just say it plunges more often than surges....just look at the long term chart and that is all you need to know.
Look at what mattrcarl said above. Once big events are out of the way, volatility drops, even if the market goes down. I intend to buy VXX puts today or tomorrow if VXX gets in the high 36's again, because whether the market goes up or down after the election, VIX will likely go down. (Unless it's a 5% bloodbath like 4 years ago.)
How does that work? Does that mean we'll be up more on Monday after expiration? I am very confused about how this works- if you told me the market would be up 1%, then down 1% I would have thought VXX might even be up during that time?