Fade the VXX

[Steven Place]

We had a volatility event last week which caused a bunch of investors to panic and pick up protection via puts. That lead to a massive move in the VIX, and by proxy the VXX.

I think it’s a bit overdone, and we can fade the VXX here.

Buy Feb/Mar 40 Put Calendar @ 1.08

If we see the VXX get into the high 40s I would look to add another round of put calendars to the trade.

 

[Steven Place]

Big gap up in the VXX. Due to VX futures backwardation and the actual VIX continuting to rip.

I’m adding a 2nd round of put calendars here to get us closer to theta positive.

Buy VXX Feb/Mar 45 put calendar @ 1.40 or lower

Here is the risk now:

[Steven Place]

After catching a little heat to the upside, VXX settled down nicely into our range and is nearing max profit.

You can do a couple things here. You can buy back the short puts and hold onto the long puts, or you can roll it into another spread, and so on.

I think the prudent bet here is to just close it out and wait for another spike in the VXX to get involved.

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