The Weekender starring VXX

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_trade_08162013Here is where the trade stands now:

  • $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.

2 thoughts on “The Weekender starring VXX

  1. The FOMC minutes were released 8/21 & the reaction was a nice up move in $VXX to near the $16 level. However, it has settled back down near $15 on 8/22 so this trade looking good to see a Pin at $15 on Friday

  2. Pingback: Best Of The StockTwits Blog Network 8-24-13 | The bclund BlogThe bclund Blog

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