#VXXGame #LongLEAPs Over the years I put a lot of research into the idea of buying long $VXX LEAP puts, since the symbol is dragged toward zero over time. I built an extensive spreadsheet showing how this strategy would have worked with every VIX leap expiration since 2006 except Jan 2009, during the financial crisis. (VXX was created in 2009, but there are models available of how it would have performed going back to 2004).
Other than Jan 2009, the 18-month to 24-month decline in $VXX is usually 60-90%; even as much as 97% down over 24 months.
So when I started buying the Jan 2019 VXX 20 puts on September 5th, 2017, the odds looked pretty good for a decent profit. I started scaling in and ended up with a total of 32 puts over multiple accounts, average price 1.603. I also sold some 50/60 call spreads against it, lowering that cost basis down to about 1.20.
But, guess what? Picked the wrong year! This is the first LEAP expiration since 2009 where this strategy did not work. And now $VXX is going away at the end of this month, replaced by $VXXB, which doesn’t have much volume yet. However, they HAVE finally added LEAPs, so I’ll be looking to start buying.
Also, because of the product termination, I closed my final short shares in $VXX today for 37.25. I was assigned 100 shares short for 27.00, and had managed to scale out of 30 of them when we dipped below 27.00 in September. Then, October happened.