You remember when oil went sub zero in 2020, well VXX just did the same thing

BY ANDREW GIOVINAZZI

December 11, 2023

Yo Pit Crazies,

If you are not buying my Weekly Profit Cycle after this weekend, the price goes up. Get in while the getting is good, and costs less.

In keeping with my big Weekly Profit Cycles presentation on Wednesday and encore on Friday, I want to reveal the magic of the VIX futures. Now the vehicle I will use is the iPath B Series S&P 500 VIX futures short term ETF (Ticker: VXX). If you want VIX options you have to sign up. I was explaining this to one of my Pro students and showing him the graphic below that I posted to our Pro Chat room.

VXX is projected to close at $14.48 on Jan 17, 2024. Already trading 2024 that went too fast! For anyone that follows our vol product madness at Option Pit, VXX has lost 99% of its value since inception because it owns an eroding asset in the VIX futures.

It erodes until it explodes.

Also, if VIX closes right here on Jan 17, 2024, VXX will be $2.20 lower.

Edge Hunter Vol Dashboard designed by Scott B.

So how does Vol become sub zero?

The Trick to trading vol is not how high it can go but how low it can go

30 years of trading experience right there. If you look at the 1 year chart of VXX below you would say wow that is the bottom. Not according to my decay profile which is nails, however VXX can go up for any reason but it drops in a predictable way. That tells me $14.48 is the terminal low to Jan Expiry.

Today in a trade I posted in the Pro Chat, they got a lot of good stuff, where I bought the VXX Jan19 16 put and 18/25 call spread for less than $1.50. That means if nothing happens VXX pays me a bit, but if any drop in vol happens I will score. And if VXX decides to take off in a debacle, the trade could pay 200%. All for free carry cost.