Feb 27, 2011

Week in Volatility

This week saw a lot of action - a strong rise in VIX and subsequent decline. VXX had a draw-up of 20% ~log(34.01/27.73) with some large intraday volatility. Although this draw-up seems significant, I think it is a good time to remember that average draw-up for SPVIXSTR (the index that underlies VXX) for the last 5 years is 49% !, and that most of 2008 the index was making new highs.

For those who want to know about risks of being short VXX I recommend my previous post on the topic, as well as recent analysis on MarketSci blog (link).

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