VXX: The Good, The Bad, And the Ugly

Screen shot 2010 11 12 at 3.23.05 PM VXX: The Good, The Bad, And the Ugly

For the first time, almost ever, VXX has some “Good”.

VXX is by and large the Dec. VIX future at this point. And the Dec. future has a very modest premium right now. It hovered most of Friday about $1.50-$2 over VIX. And it will likely decline today as we often see relative strength in the early Monday VIX. Tough to generate comps for VIX premiums of certain durations. But anecdotally, I don’t remember seeing a VIX futures premium this low when VIX itself is at a middle ground level. And VIX near 20 is about as average as it gets.

The “Bad”?

Well VIX itself is not cheap compared to realized volatility. 10 day and 20 day historical volatility sit near 11, so VIX itself has a considerable premium. SPX volatility would have to double to justify current December VIX futures prices.

The “Ugly”?

Well, Dec. also  still has a $1.50-$2 premium to Nov. that has to roll a smidge more. And soon VXX will start rolling Dec. into Jan. And Jan.has a $3 premium to Dec. So Contango still lives.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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