Have any of you fellows traded the VXX ETF (iPath S&P 500 VIX ST Futures ETN)? Or do you have a better way to make money on volatility that does not include confusing derivatives?
I’m not strong with derivatives, but I have a very good sense for fear and chaos. Even on the other side of the planet, I can feel the fear in New York. As an experiment I studied VIX, and the VXX ETF, during this oil freak-out. You can feel the fear and uncertainty peaking Tues before the Fed meeting, and it was my predication that it would, and it settled down post meeting with Fed confidence and prices holding. If you shorted VXX on Tues (betting on decreasing volatility), and released it on Friday, it was 8%, 4%, and 2% daily returns. In fact you could ride it up, and then back down.
Why can’t I make money on this every time we get an ebola, oil, whatever freak out given my super-human sense of fear? Is there an aspect I’m not seeing where I get burned? And what the hell are these instruments anyhow, futures on what exactly??
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.