VXX Up the Volume

• Posted by Adam Warner
• on April 22nd, 2010

GreenAB notes something interesting with VXX, the recent volume spike. It’s hard to see it now that the numbers on this pup have increased, but we see a volume spike of similar relative magnitude in January ahead of the (brief) market drop and volatility spike.

Keep in mind here that it’s still a relatively new product. One clearly growing in popularity, which kind of boggles the mind considering how awful VXX has done. The volume spike on Friday alone was huge. Not only was it the busiest day in VXX ever, it was over double the volume of virtually every day that came before it.

I’m not sure that’s so bullish for volatility though. That big volume surge was on a rare strong day for VXX, so it’s the de facto equivalent of a put price and volume surge into a decline. That’s not what you want to see into a counter-trend move imho (well, if you’re rooting for a trend change). Better they disbelieve instead of chase for protection. Of course we saw the put/call numbers go in the tank ahead of Friday’s market drop, so by and large you’re just seeing investors do what you’d expect.

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