Make Volatility Great Again, Then Do Not Rely On Investing In VXX

2025-01-08 22:45:17 ET

Summary

• VXX is not suitable for long-term holding due to high roll costs and poor performance; it's only viable for short-term hedging.
• Market complacency is high, but historical data suggests significant volatility spikes, making precise timing crucial for VXX investments.
• Current market conditions resemble past periods of high volatility, but diversified portfolios and gold are better hedges than VXX.
• VXX carries credit risk from Barclay's Bank PLC, making it a risky and inefficient hedge despite potential volatility spikes.

VXX overview

The iShares Path Series B S&P 500 VIX Short-Term Futures ETN ( VXX ) aims to provide exposure to the S&P 500 VIX Short-Term Futures Index Total Return. The ETNs are unsecured debt obligations of the issuer, Barclay’s Bank PLC.

This index offers exposure to daily rolling long positions in the first and second month VIX futures contracts....

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