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Particularly interesting given the decline in stocks, the VIX (VXX -0.7%) is also sliding. The...

Wednesday, October 10, 2012, 3:27 PM ET
Particularly interesting given the decline in stocks, the VIX (VXX -0.7%) is also sliding. The VIX nearly always rises when stocks decline as investors are willing to pay up for equity index options. Surely one of these gauges is getting it wrong.

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This news story has 22 comments:

Charles U. Farley Comments (10)

I'm long a crap-ton-load of VXX AND the ES, so, I think it's just ME getting it wrong.

(Boyyyyy, looking forward to doing the contango right out of these positions. Flatness is a blesssssssingggggg.)

10 Oct 2012, 03:37 PM Reply Like

thandigloria Comments (5)

Yes its hard to be long vol when contango is eating away at it all the time. I would stay away from these unless you are buying puts or have impeccable timing.

10 Oct 2012, 03:47 PM Reply Like

vision3001 Comments (195)

This is an extract from Bill Luby's paid news email/letter: "I have received several inquiries about why the VIX was down with the DJIA down 128 points. The short answer is that yesterday's movement in the VIX anticipated some of today's selloff. Yesterday the SPX was down 0.99%, while the VIX was up 8.3%. Today the SPX was down 0.62%, while the VIX was down 0.5%. Both of these data points are outliers, but when one considers that the VIX typically moves about -4.2x of what the SPX does in percentage terms, if one looks at both days the SPX was down 1.55% and the VIX was up 7.8%, about -5x of the move in the SPX and right in line with historical norms."

10 Oct 2012, 11:10 PM Reply Like

jplakal Comments (3)

Is it because of the volatility calculations for using historical volatility vs intra day volatility? If any one know let me know

10 Oct 2012, 03:39 PM Reply Like

thandigloria Comments (5)

Every day these derivative instruments sell the current VIX front month day and purchase the second month future. As long as the VIX futures are in contango then they are paying more for the 2nd month future thereby degrading the value of the instrument. These things only really explode when the VIX futures are in backwardation.

10 Oct 2012, 05:50 PM Reply Like

thandigloria Comments (5)

One more thing...this contango issue is why the hosts of these instruments warn you that the ultimate value of UVXY TVIX VXX is Zero . As long as VIX futures are in contango these will degrade to nothing or just keep reverse splitting so they can continue the downward path.

10 Oct 2012, 06:00 PM Reply Like

Profitsee Comments (4)

If that be the case, then shouldn't one be continually long the ZIV, mid-term inverse VIX ? If contango, then they converge to zero, more + on the ZIV going down less the loss on UVXY ? 3:1 ratio ? Everyone overpays for insurance it seems

11 Oct 2012, 05:26 AM Reply Like

samrush Comments (101)

this means that no one is anticipating a crash

11 Oct 2012, 01:28 PM Reply Like

Jon Peter Comments (509)

The spot VIX is not popping. No real fear, i guess. This selling is likely very short term.

10 Oct 2012, 03:46 PM Reply Like

samrush Comments (101)

this is what everyone is expecting but anyone expecting a crash

11 Oct 2012, 01:29 PM Reply Like

varunvasudeva Comment (1)

vix futures settle next wednesday, that's probably why spot is inching lower, but mid next week, we could see the new, current spot be a little higher

10 Oct 2012, 04:13 PM Reply Like

EARLPEARL Comments (59)

i thought tvix was a steal at 3 bucks...i really loaded up at 2.25 and i have bought 10,000 more under 1.50....today baffles me..up 8% yesterday and down today??????????

10 Oct 2012, 04:18 PM Reply Like

shild Comments (52)

I cant tell you short-term but if you look at the long term futures and options for 3 months and 6 months out, the VXX and UVXY and TVIX will explode in the long-term. I loaded up.

10 Oct 2012, 04:22 PM Reply Like

4cessna Comments (21)

What is to fear? The fed has the investors' back. See Barrons.com article today on VXX, UVXY.

10 Oct 2012, 05:08 PM Reply Like

eastofeden Comments (4)

How can you tell where your at with TVIX contango if bought on 9/15 and 9/26?

10 Oct 2012, 09:13 PM Reply Like

iBAIT Comment (1)

Simply put, the ^VIX is down today. Nothing is wrong with TVIX; everyone likes to make TVIX a punching bag in a bull market running on QE. If anything, blame the ^VIX. And if you're going to establish the casual relationship that short S&P = long TVIX, then you may need to do some more research on the VIX.

10 Oct 2012, 09:38 PM Reply Like

bull_market_somewhere Comments (104)

they're trading like expiring options contracts.

11 Oct 2012, 08:12 AM Reply Like

sharris117 Comments (4)

The way I see the VXX is purely out of naivety , Everyone is writing about contango’s of which I find fascinating. My approach to VXX is simple it seems to me when the market goes down ( not always ) the VXX goes up i.e. today (10/23/12), So I am betting that the election will bring a market crash, and I am using the VXX to offset my losses.

23 Oct 2012, 11:57 PM Reply Like