Known formally as the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX) was launched three years ago today, alongside of its sibling, the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca:VXZ). Together these were the first VIX-based exchange traded product to be hit the market.
To bring the accounting up to date, VXX was down 68.4% in its first year, then lost 74.6% in its second year. During its third year of trading, VXX fared much better, but still managed to decline 18.6%. Of course there were pockets of excellent performance (notably a 66.4% jump in August, as the graphic below outlines), but over the course of a full year, the roll yield drag was more than the volatility spikes were able to overcome. In fact, VXX is now down 94% from its split-adjusted launch price.
Even with the above facts, it is still possible to trade VXX successfully from the long side, particularly if one keeps the holding periods as brief as possible and/or pays close attention to the VIX futures term structure.
- VIX Exchange-Traded Products: The Year in Review, 2011
- Chart of the Week: VXX Celebrates 2nd Birthday
- VXX Calculations, VIX Futures and Time Decay
- Why VXX Is Not a Good Short-Term or Long-Term Play
- VXX Monthly Performance
- Chart of the Week: VXX Celebrates One Year of Futility
- Chart of the Week: VXX vs. VIX
- Managing Risk with a Short VXX Position
- Charting the Assets of Volatility-Based ETPs
Written By Bill Luby From The VIX and More Disclosure(s): short VXX at time of writing
Bill is a private investor who also authors the VIX and More (http://vixandmore.blogspot.com/) blog and an investment newsletter from just north of San Francisco. His research and trading interests focus on volatility, market sentiment, technical analysis, and ETFs. Prior to becoming a full-time investor, Bill was a business strategy consultant for two decades and advised clients across a broad range of industries on issues such as strategy formulation, strategy implementation, and metrics. When not trading or blogging, he can often be found running, hiking, and kayaking in Northern California. Bill has a BA from Stanford University and an MBA from Carnegie-Mellon University.