Volatility products like VXX remain among the most misunderstood trading vehicles, and many of the misconceptions that existed when this article was first published still persist today. Although the piece below dates back to 2010, the underlying mechanics of futures rolls, contango, backwardation, and the performance drag built into volatility ETPs are just as relevant for today's traders. If you've ever wondered why VXX can behave so differently from the VIX itself, this classic explanation from 2010 is well worth revisiting.
One of the standing guidelines that appears in every issue of The Daily Volume Alerts is:
“In positions with just outright long options (including long straddles), roll if that option becomes 10 points in-the-money or more.”
A recent subscriber asked a logical follow-up:
What should I roll to?
My answer:
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Join Larry McMillan as he discusses the current state of the stock market on July 6, 2026.
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In all, the correction from the early June highs to the lows of this week was about 5%. That was enough to at least temporarily remove the "bullish" designation from the $SPX chart. The Index has now fallen below its 20-day moving average, and there is resistance in the 7500-7520 area. A rise back above that area might be enough to restore the bullish scenario, but for the now the index is in a short-term negative trend.
Join Larry McMillan as he discusses the current state of the stock market on June 8, 2026.
