Is Shorting UVXY or VXX the Perfect Trade?

Long term charts of VXX or UVXY suggest they are perfect candidates for shorting but there are risks you should be aware of and alternatives to consider.

The charts for long volatility Exchange Traded Products (ETP) like Barclays’s VXX and ProShares’ 1.5X levered UVXY are astonishing.

I’m not aware of any other widely available securities that have declined like these.

Two questions come to mind:

  1. Why would anyone invest in these perennial losers?
  2. Why doesn’t everyone on the planet short these funds?

It turns out that there are reasonable reasons to buy these funds, and some people make money doing it. And a lot of people short these funds; it’s a crowded trade—to the point where it’s sometimes not possible to borrow the shares to short them.

It’s not easy money either way.

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How to short VXX—the hard way and the easy way

Easy way: If you want to short VXX the simplest way is to buy SVXY.  This Exchange Traded Funds tracks -0.5X  the daily percentage moves of VXX so it isn’t a true short, but it has the same goal—going up when VXX goes down.  They carry annual investment fees (SVXY’s is 0.95%), which I doubt is an issue for you if you’re thinking of shorting …

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Betting that fear will fade

Made my first trade in XXV yesterday, buying at 23.07.    During corrections, like the one we are in right now, the VIX index tends to spike up pretty early, a day or two in.   Later, even when the market drops are larger, the VIX does not seem to match the earlier highs–unless of course the market moves into a more panicky phase.

Going short on VIX?

Unlike the S&P 500 or Dow Jones Index, there is no way to directly invest in the VIX index.  I’m sure some really smart people have tried to figure out how to go long or short on this computed volatility index, but there’s just no way to do it directly.  Instead, you have to invest in a security that attempts to track VIX.  None of …

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