Daily Options Report

OK, here's VXX vs. SPY over the past two month's. SPY is churning like an Amishman, it's down 1%. VXX though? Down about 30%. Ouch.

But pick virtually any timeframe and you will come to the same conclusion. VXX is a terrible portfoilio hedge. What if you started at the beginning of 2010? SPY down that same 1%, VXX down 12%.

Since inception at the end of January 2009, VXX is down 71%. It's just ugly.

Now am I cherry picking? I mean SPY compared to VIX itself is relatively tame over the shorter time frames. But here's the deal as always, you can't buy spot VIX. You can buy VIX futures, but they've traded with sizable premiums for the lion's share of the past 6-9 month's, so depending on the specifics, you'd have given away maybe 3-5 VIX points each cycle. VXX tracks a rolling hypothetical 30 day VIX future, which actually makes it better in that it will theoretically never "lose" the futures premium. But as we've gone over, in order to maintain that 30 day duration, VXX has to internally roll futures or swaps out, and so long as VIX futures are in contango (virtually a permanent condition) VXX loses money each day.

I can't emphasize often enough not to get carried away with the occasional home run you see someone get on cheapie VIX calls, over the course of time simple SPX or SPY puts work far better.