VIX futures are down a small amount, and VXX is only down a few cents. The 10% contango should have VXX down a lot more today, but it's not. Contango seems to be not working for the last couple weeks.
The futures being in contango doesn't necessarily mean that VXX will go down. It all depends on when the futures move down, assuming VIX stays fixed. If the move is more concentrated near expiration dates then the VXX move will be much smaller than the average contango.
So the question is, now as we approach May VIX expiration, will they make VIX come up to May VIX future price or make May VIX future converge down to spot VIX. For the former, VXX will stay flat or little down if not up until expiration. For the latter, VXX will go down due to contango finally working. I'm betting that they will bring spot VIX up to May VIX future price. There must be reason that VIX futures are so strong even as market goes up. My other guess is whether S&P call option premium rise up to put option premium as market continue to rise without correction so VIX rise due to higher call option premium when market goes up. Maybe someone who has access to S&P option price can confirm this.
One of my retirement accounts suggest a 14% and change return YTD. This is despite my moving part of it to bonds so that I may have some buying power when market corrects, even if only a 5% correction.
With returns like that on a basic retirement plan, one must expect a pullback is more likely than not in the next weeks ahead. I expect a pullback this month, and if not, then certainly by mid July.
VXX price behavior is simply reflecting this expectation. VXX will trend down over time. Look at its returns YTD!
I completely agree with you, and that's the same question I've been asking myself since the beginning of May... Sometimes I wonder if the underlying structure of how VXX NAV is calculated has changed, because as you mentioned contango is running about 10% but it's not reflected in VXX price.... I feel like something has changed or we could see the full impact on contango when OPEX expires this month.... time will tell