The Money Tree

Safely Generating Income in Retirement

Update – VXX

Posted by mounddweller on March 18, 2012

Fellow Traders,

I want to update you on my VXX trade.  As you’ll recall I entered this position back on February 29th, selling 5 VXX MAR naked puts at a strike price of $22.  The premium I received was $0.50/share.

At the time I placed the trade VXX was trading around $24.52.  The recent low had been $23.72.  My strike price at $22 seemed reasonably safe.  Alas, the best laid plans often don’t work out.   While I thought the market was ripe for a correction which would cause VXX to rise just the opposite happened.  The market has continued to move higher sending the VIX and VXX lower.  Friday, VXX closed at $21.56.

Rather than have VXX put to me I elected to roll out my position.  However, instead of rolling my puts out to the normal monthly APR expiration I chose to roll them to the next available weekly expiration on Friday, March 23rd.    With just 8 days to expiration I was able to roll out with a net credit of $0.62.

Net of commissions my total credit thus far in this trade is $535.02.   If VXX closes above $22 on Friday I will have earned a 4.86% ROIC with a holding period of only 24 days.  If VXX remains below $22 next week I will roll out another week.  Sooner or later the  market will have a down day or two and that will be my opportunity to close the trade at a profit.




8 Responses to “Update – VXX”

  1. rhm said

    Hi since the vxx tracks the next two futures contracts and there is a huge contago right now i cant see how, with the daily rolling from april to may futures how this can go up until the delta between forward contracts gets back to normal..this coul easily hit 13-15 before the end of april.

    • mounddweller said


      Appears you may be correct. This is the first time I’ve traded VXX and I’m getting beat up pretty good. Thankfully, I didn’t bet the farm on this trade and believe I can ride it out.

      Appreciate your insight about the contango. Stupid on my part really to not have taken that into consideration.


  2. Rich said

    Hi Troy,

    I’ve been following VXX ever since you mentioned it back in Feb. It seems to only have been in existance since just before the market bottomed back in early 2009. I think at that time it was trading around 450 a share. I had an Apr 20 put in play but after the continued down trend I rolled that out to a May 19. Now that is in the money after todays close. Do you feel that you will be able to continously roll the 22 put out each week for a net credit? I’m considering buying a long put to hedge my short position.


    • mounddweller said


      As I mentioned in my earlier response to Rhm I getting beat up pretty good on this trade. However, one thing I’ve learned is just as soon as you throw in the towel the situation will begin to turn-around. My plan is to continue to roll these out week to week and down, if possible, for a net credit. Once the net credits run out on the weeklies, I’ll look to the monthlies. Eventually volatility will go back up and VXX will turn around. The market can’t continue to go up forever.

      The fact that VXX has weekly options and trades in $1 increments gives us a lot of flexibility to ride this out.


      • Rich said

        One thing for sure with VXX, it makes big moves. I think one could make some good returns if you can be on the right side with this ETN. As an example, this morning, after the market sold off a bit I went long with a weekly Mar 30 put at the 18 strike. I paid .42 plus 8.25 for the commission. I immediatly put in a sell limit order for .65. That would give me almost a 10% return if it hits .65 by next friday. Like you I have only a small amout of capitol tied up with VXX. The premium fell to somewhere about .34 mid day and at the end of the day it closed at .52 If the market bounces just a little tomorrow I might get filled early. The daily range of VXX over the past two months is greater than 100 basis points.


      • Rich said

        My sell limit order was filled today. Only made $6.50 on the transaction but the interesting point is that this was an 11% ROC for just one day. So if one could guess right on the overall move on a week to week basis there are some good returns possible.


  3. SB said

    “So if one could guess right on the overall move on a week to week basis there are some good returns possible.”
    If one could guess right they only need to do it once and retire.

    I, along with you, have guessed wrong on the VXX. I am short a naked 20 put in one acct and short a 17/19 put spread in another acct and am considering selling a call against it or a call spread. I’m sure the minute I do the darn thing will bounce back up through my call.

    • Rich said

      I tried placing a collar trade over the weekend. However on monday I screwed up and ended up with a small loss. I think that on a day where the futures point to a real high or low open if you can go long on the call or put as necessary it should be possible to get most of the move. Other than that I’m also playing around with some fast EMA moving avgs to see if I can get on the right trend and ride it for a nice gain. Am only obligating small amounts of capitol each time.


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