c505218304b50c59c3659f6dda43bae7-links-0–> and why do we care?
Well, we care about the VXX because we can make money with it – in a higher probability fashion than we can with some other tickers – and that’s based 7 years of data. While limited, we can glean some interesting insights into how we can make VXX work for us.
VXX is an exchange traded note that trades just like a stock would (or an ETF) during market hours. By holding VXX — it sort of continually does trades for you.
What kinds of trades?
It buys the 2nd month VIX futures contract and sells the front month VIX futures contract. In a contango up-ward slopoing term structure environment, this generally translates to buying high and selling low — which is the opposite of what you’re supposed to do to make money.
That’s why VXX always loses value – historically. Just look at a long term chart.
To make money, shorting VXX is generally a good idea – especially during times of elevated volatility.