If the VIX goes from 12.90 to 16 in the next 2 weeks will VXX rise?
Anyone got a handle on that? The futures are much higher than the spot VIX. If we rise from 12.90 to 16 on VIX, which is about 22%, we also have to account for the VIX roll, so I estimate if VIX rises to 16 VXX will go to 24 over the next 2 weeks and maybe not that high. Anyone agree/disagree?
If VIX rises to 16 in two weeks, which is unlikely, VXX will be near 26 if contango between spot and March futures drops to 10% and remains constant during the VIX spike (March futures will be at 17.6)...
If the VIX rises many traders, fund managers and individual investors may seek to buy volatility. VXX is one of the more liquid ways to do this and thus a big move to 16 in the VIX may correlate to a bigger percentage move in VXX....hard to account for the roll value, but I would guess a move to 16 on the VIX would take VXX well over 24, closer to 26-28 as buyers bid up the price of insurance.
This tracks net asset value because it is very liquid. It's not like TVIX where they stopped issuing units.
The futures did not move down very much today. Spot close at 12.90, futures at 14.25/15.40/16.30. Remember the spot stops trading Wednesday after next, so there will be a roll yield that hurts VXX over the next 2 weeks. I do not think the VIX will go as high as 16, but if it does I would say VXX increases about half as much, so maybe 10% gain on VXX, taking it to $25.75 or $26. Keep in mind VXX has failed several times recently to break through 25 so it will not be easy.