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Market volatility, volume, and system availability may delay account access and trade executions. Past performance of a security or strategy does not guarantee future results or success. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.
Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc. All rights reserved. Home Trading thinkMoney Magazine. By thinkMoney Authors January 6, 5 min read.
5 Misperceptions About VXX - TheStreet
Key Takeaways Create trading strategy ideas based on relationships between volatility products Understand how the universe of volatility products are related Know the pros, cons, and risks when trading volatility products. Got Vol? Start your email subscription. Recommended for you.
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A prospectus, obtained by calling , contains this and other important information about an exchange-traded product. Read carefully before investing. ETNs are not funds and are not registered investment companies.
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ETNs are not secured debt and most do not provide principal protection. ETNs involve credit risk. ETNs may be subject to specific sector or industry risks. Leveraged and inverse ETNs are subject to substantial volatility risk and other unique risks that should be understood before investing. Like price and volume, volatility has been known to move the markets tremendously and, consequently, has a great impact on investor portfolios.
Whether volatility is high or low, the VXX offers investors a unique opportunity to mitigate risk over time. VXX is composed of a certain number of first-month and second-month VIX futures, and its value models the returns one would derive from holding the contracts throughout the periods, between expiration dates. Where p 1 and p 2 represent the prices of the first and second-month VIX futures, and n 1 and n 2 denote the number of first and second-month futures contracts. N 1 and n 2 are chosen so as to have a 1-month average future lifetime of the VXX. C is the contract base.
This formula makes the VXX very vulnerable to both contango and backwardation, as these two factors significantly impact the contract base. Contango or upward sloping is when the futures price is higher than the expected future spot prices, while backwardation is when the futures price is lower than the expected future spot price. Because a futures price eventually converges to the expected future spot price, contango is less desirable for speculators, whereas backwardation is more appealing. The VXX is rebalanced daily, which can lead to price erosion. This, as well as the mentioned mean-reverting tendency, makes trading the VXX on the options or futures market inherently risky.
Its composition also makes it difficult to trade in traditional markets. Tools Home.
VXX/VXXB Trading Strategy
Stocks Stocks. Options Options. Futures Futures. Currencies Currencies. Trading Signals New Recommendations. News News. Dashboard Dashboard. Tools Tools Tools. Featured Portfolios Van Meerten Portfolio. Market: Market:. Options Prices for [[ item. Go To:. Near-the-Money Show All. Totals reflect options traded during the current session.
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