A solid Hedge for VIX Complex Traders is the VXX.
VXX is comprised of Short Volatility Instruments - M1 (or Front Month of
VIX Futures Contract "July" until tomorrow's settlement) and M2 (August
VIX Futures Contract).
Yesterday we observed the Short End of the VIX Curve trade to "Par" where
July and August traded to 2460 simultaneously.
The Short End of the Curve immediately was SOLD heavily as the threat of
Backwardation was not to be permitted in the Curve.
When Backwardation in the Volatility Curve occurs, it is a leading indicator
of the "Potential" for a large move higher in Price of the Complex. This
threat was SOLD into immediately.
We immediately SOLD VXX against Buys we had opened @ 20 on the July VX
and began selling July as price moved to 21s - 2365 was our preferred exit
pivot for the burst higher.
The VIX has broken 2285, 2175, 2075 at present on the Front Month settling
tomorrow. 100% of the VXX will be contained within August VIX and the Roll
into September VIX will continue into the next Rollover.
BY example - Aug @ 96% / Sep @ 4% on the 22nd of July. The accumulation
of the Sept. VIX Contract will continue until it is solely comprised of Sep VIX
at the next Rollover for Aug.
Sep VIX slowly builds from 0% to 100% as we move from Contract Rollover to
Contract Rollover.
As the Chart above illustrates, there is opportunity within the VXX during
these times. Using the VXX as a hedge against the VXM (Micro VIX Contract)
can be immensely rewarding - Traders can use both sides of the Trade, knowing
"Backwardation" will not be permitted (until it cannot be contained).
VXX is comprised of Short Volatility Instruments - M1 (or Front Month of
VIX Futures Contract "July" until tomorrow's settlement) and M2 (August
VIX Futures Contract).
Yesterday we observed the Short End of the VIX Curve trade to "Par" where
July and August traded to 2460 simultaneously.
The Short End of the Curve immediately was SOLD heavily as the threat of
Backwardation was not to be permitted in the Curve.
When Backwardation in the Volatility Curve occurs, it is a leading indicator
of the "Potential" for a large move higher in Price of the Complex. This
threat was SOLD into immediately.
We immediately SOLD VXX against Buys we had opened @ 20 on the July VX
and began selling July as price moved to 21s - 2365 was our preferred exit
pivot for the burst higher.
The VIX has broken 2285, 2175, 2075 at present on the Front Month settling
tomorrow. 100% of the VXX will be contained within August VIX and the Roll
into September VIX will continue into the next Rollover.
BY example - Aug @ 96% / Sep @ 4% on the 22nd of July. The accumulation
of the Sept. VIX Contract will continue until it is solely comprised of Sep VIX
at the next Rollover for Aug.
Sep VIX slowly builds from 0% to 100% as we move from Contract Rollover to
Contract Rollover.
As the Chart above illustrates, there is opportunity within the VXX during
these times. Using the VXX as a hedge against the VXM (Micro VIX Contract)
can be immensely rewarding - Traders can use both sides of the Trade, knowing
"Backwardation" will not be permitted (until it cannot be contained).