What Are The VIX Futures Doing?

Andrew Giovinazzi

Use VXX to figure out how VIX futures are moving.

Yo Pit Crazies,

First things first, if you’re ever in Baltimore, which I am right now, check out the restaurant La Scala. It got my approval and I plan to eat there again today.

Now, part of trading options is trading the volatility. Part of trading volatility is trading the VIX. It is the single most important tool I use to divine what is going on in markets. And trading it can be confusing, so anytime I find something that helps I will pass that on to my students.

In The Trading Desk earlier this week we used iPath Series B S&P 500 VIX Short Term Futures ETN (Ticker: VXX) to help manage some of the volatility exposure of the position.

What that did was help set up a win/win, so both the S&P 500 Mini Index (Ticker: XSP) initial strangle and the VXX put position made money – 27% to be exact.

VXX chart with one-day candles for 2023

What is the VXX and what is the trade for today?

VXX Owns A Basket of VIX Futures

Note from the chart above that the nature of VXX is very volatile – or not.

When VIX does not move, VXX only moves a little because the VIX futures still decay to the VIX cash number every day. Then things go nuts, VIX spikes and VXX can move 50% or more in a few days.

That is the nature of VXX ….

Slow decay
House-on-fire moves

The long-term trend for VXX is horrible, as it is a negative 99% return since inception.

Holding VIX futures for the long-term is terrible, but can be great in the short term for a few days. We do have economic numbers today, and I would be surprised if VXX is not lower on the close than it opened. VXX puts on next week looks good to me.

The Rundown: What’s Winning Around Option Pit
OP Mentoring
SPY,VIX Apr14/Apr19 395/385 put vertical, 20 puts closed for a 35% gain.

Win the Week
SPY Mar31 404/405 call vertical spread closed for a 130% gain.

SPDR Select Industrials (Ticker: XLI) Apr21 100/102 call vertical spread closed for a 28% gain.