and win trading VXX is to hold a short position over a relatively long time frame. This is actually a horrible short term trade, for no idea what direction it will move from moment to moment. It obviously has no direct correlation with any reliable point of reference. The VIX will eventually dictate which direction it will move over time, but magnitude of move may not necessarily be easy to predict. And who the heck can consistently predict what the VIX might do.
Over time though, VXX will trend down secondary to contango which is the dominant scenario, with backwardation occurring rarely, but usually at times when you least want it to.
Also, market panics tend to be abrupt and brutal, but short lived. And, the recovery from market devastation is long and enduring. Therefore, you get rare spikes in VXX and mostly steady decline at other times.
We are in rare territory where the market is clearly overbought, so many are anticipating a pullback. Therefore, put buying is on the rise, resulting in the ironic rise in the S&P while at the same time VIX bouncing off of all time lows.
It all makes sense, and if we get a pullback in the market, probably will get a spike in VXX. It may be months before the market corrects though, and as that becomes more apparent, VIX and VXX will again fade to new lows. Just very hard to predict when the pullbacks in VXX will happen, like yesterday just corrected midday, and perhaps will pullback Monday, or Tuesday of next week. Regardless, the pullbacks will occur, just have to have a trade working to participate. No one sitting in cash will be able to time the pullbacks and jump in just before they occur. And the folks jumping from long to short will guess wrong the majority of the time.
Main thing is to be comfortable with the amount of money you set aside to short VXX or buy XIV or puts or whatever short position one chooses. Also have some type of hedge or protection in case the unexpected occurs and market turns aggresively against your trade. The spikes can be dramatic and may last a bit as occurred Aug/Sept 2011.
I have not followed XIV or studied it. I do understand that it is a reverse of VXX, but how accurately it performs as a reverse etn, I am not sure. I do know that shorting VXX, all that contango that haunts the etn is then working for you. The great risk with shorting though, is the potential for unlimited loss.
Last year, I mostly bought puts, as this limited my potential for losses, and allows for great leverage.
I like shorting now, because allows me to participate in premarket and after hours trading if desired.
Again, I would not touch this etn without a hedge, and I sometimes adjust my hedge such that I might occasionally benefit from a rise in VXX, rather than a decline. That is the part that I keep secret, so the big boys out there cannot just take me out whenever they choose!