Never buy VXX or VXZ & other similar ETF's because all of it is a scam intended to steal money from you. VXX which has the biggest volume from other such ETF's has nothing to do with VIX index performance, the contradiction of disclosure is that even if they (VXX) say that this is a spread long bet over all available forwards on VIX futures, this is BS in itself as even on a daily basis you will never catch (get) the full potential in a % change in cash VIX index or nearest VIX futures performance, over medium term you will always lose as there is no correlation between VXX & VIX, they only look to go in the same direction but over 1Y it equals 50% loss holding long VXX no matter what VIX Index will do over 12 months. If you hold VXX you are either stupid or you don't understand what you are doing, you are paying non existing premium (contango) holding VXX, even if you would only hold VIX future from the beginning of expiration to the end & then just buy next expiration you would lose nothing in performance of benchmark, because each time you would buy new exp. VIX futures contract, you would pay only a fair market price for VIX at this day, this minute, this moment, even if next exp. is higher than ex. exp. still after you closed one long trade, bought new, you pay a fair price & lose/win money depending on VIX performance from there on. Now look charts & decide if you are really so stupid to pay more for what is worth much, much less. This is what VXX & all other volatility ETF's are, they sell you something that you can get for ex. 100$ everywhere, but they charge you for the same thing 150$, if you like to lose then VXX is a perfect long for you.
In the chart above you see daily continuation contract of VIX futures compared to VXX ETN over 1Y performance. Investing 100,000$ in VXX will leave you with a loss of 10% while just rolling your VIX futures from one expiration to the next will pocket you with 19% profit. VXX trader is left with 90,000$ while VIX futures trader is left with 119,000$. From 90,000$ to 119,000$ is 33% difference to catch up, holding the same thing!
The above chart shows a nearest VIX futures performance against same VXX ETN over 2 years. While VIX trader lost only 12% over 2Y, VXX trader (long) lost 78% & here how it looks when there are real money involved. Trader with 100,000$ is left with 88,000$ while VXX investor is left with 22,000$. The difference in performance between them is 400% to catch up from the bottom to the top, holding the same thing!
In the above chart is VIX index spot chart compared to VXX ;-) as you see these assets have no correlation even if investors buying VXX think it should. This is how nicely they steal your money.
No matter what you expect of VXX you'll never get it. The only way to invest in VIX is buying VIX futures, or selling short VXX & buying against it VIX futures pocketing the difference as VXX will always underperform real VIX performance. This is what I am doing & in addition I like to daytrade VIX futures with my secret knowledge of this market. VXX pays for my mistakes ;-)VXX Has No Future, VIX Futures Do - Deutschemark - Seeking Alpha |
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