http://data.cnbc.com/quotes/VXX
VXX closed down 4.5% today and then dropped another 1% after hours. I'm really quite perpexed that the VIX (now at 15.64) is as low as it is and continues to drop. We are really hitting some new lows and in my opinion, the market is not reflecting what is really going on in regards to global events. I smell a "bull trap" and I think investors who buy into intruments like SPY will be sorry in a few months.
I did not enter my VXX IC. Towards the end of the day, VXX started dropping and the short strike was deep inside the SD for the 4 days left of trading. I cancelled my order and chose to sit it out and not force a trade. However, I do think that long term, VXX will eventually correct. I'm looking at the June 16/18 Bull Call spread. EOD, I could have picked this up for $1.30/contract debit. As long as VXX stays above $18 by June expiration, I stand to make a good chunk of change. I was looking at 5 contracts - $650 debit but if VXX corrects and stays above $18 by June, I stand to make $350 which is a 53% ROM or roughly 18% ROM per month. Not bad. Now if VXX does not correct and keeps going down and closes below $16 by June expiration, I lose all $650. I will have plenty of time to manage the position and I can't see VXX going much lower. However, I am cautious and as such, I don't like the fact that it DOES continue to head lower. I'm on the sidelines and maybe I can get the 16/18 cheaper or even the 15/17 for the same price later on. We shall see.
