I have a mechanical trade that I do each weekend in the $VXX ETF. The basic thesis is that this ETF experiences decay over the weekend and so I try to capture some of that by being short.
This trade is always a short. Always.
I do track various data points on the trade and here is a sampling of that data:
There are 2 basic trade approaches that I use:
- Short the stock
- Initiate a Bear Risk Reversal by selling an upside Call and buying a downside Put. There are weekly options, with tremendous volume, so you can implement this trade easily (sometimes for a credit !)
One additional rule that I have added in recent months is this: If the price is down 4% or more already on Friday then the trade is optional only (but will be monitored regardless).