On Thursday morning I dumped my VXX stake -- the iPath S&P 500 Short-Term Futures ETN.
I bought a small position in it on April 15 for $27.57. My exit price was $38.30, for a gain of more than 38.9%. Not bad for four months.
This was the only time I've ever toyed with anything like the VXX. Normally I just invest in what I believe to be good companies at good prices, or just sit on the sidelines in cash. But there were a lot of volatile things going on in the world and the economy, yet the market was acting as though volatility was nothing to worry about.
Hence, I went "long" volatility (or a hunch we'd be getting some) and decided to buy a small holding in the VXX.
Lastly, apologies for not posting this Thursday evening. I try to let any readers know my moves in a timely fashion, but I've been swamped recently with non-blogging projects and haven't even logged in to this blog for a while. I know several people have left comments and I haven't responded yet. I'm not happy with that and will try to do better in the future.
Why would you hold this thing for more than one day? It is designed to track the DAILY change in VIX futures. The instrument decays over time due the expense of rolling the futures upon expiration.
Posted by: wsm | August 20, 2011 at 09:12 PM
Are you expecting volatility to reduce or was the dump of VXX for strategic redeployment of the proceeds? Thanks
Posted by: Nik | August 21, 2011 at 08:21 PM
That is actually a strong increase. I am looking toward putting more money into the market and studying what happens and what the predictors are. I will be sure to read your blog for more information.
Posted by: Murad Abel | August 29, 2011 at 05:36 PM
@wsm I was thinking the same thing. It definitely decays over time. I wouldn't have held it any longer.
Posted by: Melinda Loan /a> | August 31, 2011 at 05:11 PM
39% is a nice gain over four months. I think that you sold at exactly the right time.
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