The $VXX is an iPath S&P 500 $VIX short-term futures ETN. It is designed to be a short-term trading vehicle only but if you must have a trade on longer term it should only be a SHORT.
I have written on my Blog a few times about the weekend decay trade that I do and thought I would revisit the subject again since the $VIX has been showing some strength in recent weeks.
Here is the basic goals of my trade:
- short $VXX over the weekend
- the idea is to capture some decay
- I typically use Options only but will at times incorporate a short on the ETN itself
- I sometimes will not do the trade if there is a lot of angst in the market or some known event is looming that could cause violent swings
- I have a few rules including one where I will do no trade if it is already down 4% on Friday (or last trading day of the week)
I am being extra careful with the trade right now (since it is back over the $15 level). Here is my current trade:
- I am short the ETN at $15
- I am short the August 23 weekly 15 Straddle
- I am long the August 23 weekly 15.5 Calls (was originally the 16 strike)
- This trade currently has a credit of $.68 on the Option pieces (I did one adjustment, noted below)
Here are some comments/adjustments that I have made since initiating the trade on Friday August 16:
- $VXX is trading at $15.28 so the short is showing a .28 loss
- The short $15 straddle pieces are trading at $.45 for the Calls and $.18 for the Puts (sold this for $1 on Friday)
- The long $15.5 Calls are trading at $.23
- If $VXX can stay here, or even drift down to $15, the gain would be the current $.68 credit
I normally close this trade on Monday (or 1st trading day of the week) but I elected to ride with to see if it can do the $15 Pin.