You guys who think this shows it is a scam do not understand this very well. During the previous 3 days monster equity ramp up, vxx didn't drop all that much, less than could be expected, it was cautious. Now friday we get a small sell off with bad data and a commodity crash. What happened to equities? they stayed put, very orderly. Friday made the market more stable short term not more unstable. Here is why vxx dropped.
Now i'm not saying it was right, but it does make sense in a way and happened a few times before. I'm actually short spy over the weekend as i think both the yen and commodities might have a nasty risk off move sunday night as technical levels were broken on oil and gold. So EM might sell off and futures could be down monday morning. Not a high confidence trade though. GL
Oh it would be great if the market gaps down Monday morning and VXX gaps up. Based on what I see from the chart, I think there's a good chance the market would reverse and turn green. So I would go on heavy margin and short VXX if it gaps up on Monday.
There was a person on this board (I forget his name), who shorted VXX on margin and it went against him. If I remember correctly, he got a margin call and the broker closed his position and ended up wiping out his entire account. I think he ended up owing the broker money.
I'm personally short VXX, but with a small portion of my funds and I keep money in reserve incase VXX spikes against me.
VXX futures (SPY options) were wildly manipulated this Friday.
Just compare to the situation a month ago. Then also was Friday (3/15/2013) and current month VIX futures were also expiring in coming Wednesday (3/20//2013) pre-market.
VIX was at its lowest point in 6 years. at 11.30 and VIX March futures were at 12.50 (11% premium) and VIX April futures (4/17/2013, premarket) were 14.60 (30% premium). And S&P500 also had hit new record and retreated 0.2% that Friday (3/15/2013). Very similar picture.
So, last Friday VIX ended up 12.06 (just in the last moments), 7% higher than 15-Mar.
Current month futures which are to be traded only 2 days are almost irrelevant for VXX calculation.
Next month (Apr) futures at 15-Mar were 14.65 (30% premium to VIX) and 12-Apr next month (22-May premarket) futures were pressed down to 14.15 (17% premium). And also pay attention that upcoming VIX futures cycle (April-May) is 5 weeks and not 4 weeks as was between March and April expiration.
By all math and logic the premium to VIX May futures should have been much higher, at least 20%, there is no reason why VIX is now 7% higher but futures, one-week longer are 4% lower than in was in March.
VXX should have been closed in 18.80-19.00 range, at least.
What's happening is that big banks trading desks manipulate options prices to make maximum profit from VIX and VXX expiring options (such manipulations happen mostly Fridays).
And I would not elaborate about legality of what they do.
Just don't be duped. It's manipulation. And back in at March, within two days VIX jumped from 11.30 to 14.39 , VXX adjusted 5% up. I believe the same will happen next week, with VXX moving higher to offset last Friday manipulation.
Also, looking at global markets, there is alarming instability in different asset classes (bonds, commodities, gold, emergent markets, European markets) and many portfolios go through major shifts. All this should be manifested in higher VIX prices.