Yet again I spoke to some unknowing trader that is worried about volatility rallying in the next few months. ?The trader suggested he buy VXX to hedge his portfolio.
Traders: ?NEVER BUY AND HOLD VXX. ?It is a piece of junk. ?This is a one year chart:
Livevol (r) www.livevol.com
Since inception the ETP is off about 99%, and will continue to go lower as long as VIX futures term structure looks like this:
If the VIX futures look anything like the picture above, do not buy and hold this product. ?Or any of the VIX ETP’s for that matter. ?The products are poorly constructed and should only be traded by professionals. ?Yes VIX is at a low price, it may go higher, ?VXX may not though.
The Trade:
If you need to hedge volatility, read Russell Rhoads’ book and trade VIX options or futures.