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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