Thoughts on VXX

It’s been pretty well researched the VXX is NOT a very good proxy for the underlying VIX. I’ll leave it to you to find out why if you don’t already know. However it is important, at least I think, that VXX is still a trade-able security which offers a lot of liquidity and better yet a high amount of signal. 5 points in VXX is just as good as 5 point in SPY for your bank account so why fret over the underlying mechanism? If there is an exploitable pattern, capitalize on the opportunity! Here’s a simple trend follower I threw together:

So looks to me like there’s definitely some signal there to capture.

~ by largecaptrader on May 16, 2010.

2 Responses to “Thoughts on VXX”

  1. If it’s possible, can you explain the trend follower strategy?

    • It’s a simple ATR based trend follower. If the underlying moves X number of ATR’s up then buy, vice versa to sell. Probably a Moving Average crossover would work as well.

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