VXX Only Looks Good in Shorts Bill Luby Oct 29, 2009 8:20 am |
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At the moment, not only do short VXX positions have mean reversion going for them, but even with the spiking VIX, the VIX futures are still in contango, meaning that they're upward sloping over time, with the second month more expensive than the front month. The chart below shows that while the difference between the second month VIX futures and the front month VIX futures has been declining, it's still substantial, which translates into a meaningful negative roll yield that continues to work in the favor of shorts.
Click to enlarge
Finally, not too long ago, VXX was difficult to short at most brokers. This is not the case any more.
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