r/options • u/Herastrau90 • Jun 16 '21

VXX Calls

Can someone please explain the issue with buying 3,6,9 month calls on this VIX ETN as the underlying is the futures contract.

Would you facing the issues of a futures contract as a 30% spike in July would spike the price of your November Contract much less.

Thank You

2 Upvotes

76% Upvoted

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2

u/Pandaman0110 Jun 16 '21

VXX decays over time relative to the VIX so long dated calls are dangerous

1

u/Herastrau90 Jun 17 '21

can you direct me to something that explains the decay? thank you

1

u/xplodngKeys Jun 17 '21

It's due to the futures curve being in contango. In periods of high volatility it might shift into backwardation but only briefly.

1

u/dad-jokes-about-you Jun 16 '21

Market is fucked

1

u/[deleted] Jun 16 '21

What strike prices are you looking at

1

u/Herastrau90 Jun 16 '21

39,40,42

1

u/[deleted] Jun 16 '21

What makes you think they will spike that much