A System For Trading VXX

Posted on February 9, 2012 - 5:09pm

ryanbrennan's blog

By Lawrence G. McMillan

The CBOE’s Futures Exchange introduced futures on the volatility index, $VIX, in 2004 and began trading options on $VIX in 2006. The Barclay’s Volatility ETN (VXX) has been around since January 31, 2009. VXX owns $VIX futures and rolls them in a manner consistent with the formula for creating $VIX. Hence the two – $VIX futures and VXX are directly related. We have recently conducted a study, investigating a trading system for VXX, based on the differential in the prices of the two front-month $VIX futures. It turns out that this system seems to have good profit potential. The link between the two is fairly obvious (as we’ll explain shortly), but I really haven’t seen any published systems regarding trading this relationship...

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ryanbrennan's blog

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