Is shorting the VIX a free lunch? A quick glance at the iPath S&P 500 VIX Short-Term Futures Exp 30 Jan 2019 (NYSE:VXX) chart suggests it. Computer study of VXX, however, reveals that buying and selling upside and downside alignment of price and volume significantly outperforms buy-and-hold (see Table).
Buy-and-hold (B&H) has produced an annualized return of -60% since 2009; a profit of 60% for shorts. Seven bullish alignments of price and volume have been generated since 2009; they averaged 6 weeks. Upside alignment produced a 6% average annualized return with 231% and -77% maximum and minimum. Downside alignment, a bullish trend, produced a 1640% average annualized return with 61101% and -19% minimum.
Headline: Is Shorting Volatility A Free Lunch?
Thinking about shorting volatility? You’re not alone.Short interest in the long volatility ETN (VXX) has exploded higher in recent months.