The weekend short trade in the VXX ETN

Here is a little background on $VXX to start the post off:

VXXFor a more detail you can visit the iPath site here.

Now on to the trade setup. Here are the specifics:

  • This is a scheduled trade that I do every Friday (or the last trading of the week)
  • I primarily use Weekly Options in the trade design but will short/go long the ETN itself too when appropriate (including as a hedge)
  • The trade is to be Short
  • The goal is simple: catch decay over the weekend
  • A few rules I have in my trade process are:
  1. If $VXX has moved 4% intra-day I do not do the trade
  2. The trade is exited on Monday (or the next trading day)
  3. There are situations where the I do not do the trade (extreme volatility, expected weekend events, etc.) and note such in my Trading Journal and twitter feed. There have been 13 weekends that I have not initiated a trade since beginning in January 2012.

With that in mind, I thought I would discuss a little more on the trade I have this weekend. Here is a look at what I did:

VXX_tradeHere is the trade break down:

  • I am short the June 28 weekly 22.5 Call
  • I am short the June 28 weekly 21.5 Put
  • I collected $1.52 in premium (which expires Friday)
  • This gives me a trading range of 19.98 to 24.02

So why this trade? Here is a current chart of $VXX to see how this range matches up to recent prices:

VXX_BSome performance data for this trade since inception:

  • 4 failed trades that were > 1% loss
  • Largest gain was in October 2012 followed by March 2013
  • Largest loss was in June 2012
  • Average gain is 1.45 %
  • Average loss is .62 %

One thought on “The weekend short trade in the VXX ETN

  1. I went Long stock at 22.40 as a hedge on 6/24 and sold at 22.60 to add $.20 to my cushion. I entered Long again at 22.55 and sold at 22.86 (2nd hedge) for +.31 bringing my cushion to 2.03. During market hours: BtC June 28w 22.5 Call & StO June 28w 23.5 Call for .37 debit. I later adjusted this once more: BtC June 28w 23.5 Call & StO June 28w 23 Call for .22 credit. Cushion is now at 1.88 on this Short June 28w 23/21.5 Strangle.

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