02 October 2009

The Thing With VXX

I'll bet you didn't know it, but the VIX has an ETN too
And if you'd care to take a dare I'll make a bet with you
Now the VXX is a pretty good fiddle boy, but give the VIX its due
I'll bet a fiddle of gold against your soul, that the VXX has negative roll too.

...with humble apologies to The Charlie Daniels Band.

Yep, just like some of the commodity EFTs. Bill Luby at VIX And More highlights the problem with VXX as both a hedging instrument and a longer term play. Anyone thinking of having a play with VXX should read his post.

The bottom line is that when you need it most, VXX is at its worst in tracking the VIX.

For a bit of true poetry and some amazing fiddle playing:

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