Think Twice Before Chasing These

Hey Traders,

We got a little bump in volatility to start the holiday-shortened week …

But after a midday peak, we started to see the VIX drop off again.

Now, with markets lower on the day, this might be when some traders are looking at volatility as an alternative place to put their money.

But, just like I’ve told you before, there’s a few volatility tickers that I would NOT advise you to go long in right now (or almost ever): iPath S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) and ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY).

I know some of you are going to see UVXY and VXX’s jump over the last two days and want to argue with me.

Chart courtesy StockCharts

And hey — it’s your money. If you want to try to get lucky with day-trading or swing-trading a volatility ETF, be my guest.

But it is the inherent nature of VXX and UVXY to lose money.

And before you even think about touching one of these tickers, you really should read this article.

I wrote this a few weeks ago, but it’s as relevant now as it ever was. And it really sheds light on why I almost never go long in these — especially UVXY.

Above you can see the 21-day hourly chart for UVXY. Sure, the last two days saw a little bit of a jump …

But look at UVXY’s one-year chart (adjusted to account for the 10-to-1 split in May) and tell me again how you think that long position is going to go …

Chart courtesy StockCharts

Like I said, it’s your choice.

But you really should read this first.

Your Only Option,

Mark Sebastian

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.