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iPath S&P 500 VIX ST Futures ETN Message Board

  • dastraube1 dastraube1 Dec 29, 2012 12:42 PM Flag

    Would someone please explain the VXX to me?

    From what I can tell, shorting the VXX over the long term is almost a guarantee for a large return. I guess that's because we have contango working for us. Also, doing a short spread is a way to make a heavy bet while not losing more than one's principle. So what am I missing? Why isn't everyone doing this? Is contango not a guaranteed thing? Can we suddenly go out of contango for a long period of time? Is that the risk? Or is the risk just that we can go into a sudden period of very high volatility and if we're not conservative enough, even the sure thing will lose money? Thanks

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    • Long term "investment" in VXX is a losing proposition, short term plays can be profitable...
      Speaking from experience...I prefer day trades for VXX but will hold overnight if it looks like the trade will go as expected...

      Your analysis is good but all the downsides you imagined are real and any of them will happen eventually.

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