Options Jive - November 5, 2025 - Options Jive: How Contango Kills VXX
Update: 2025-11-05
Description
Hosts Nick and Tony explored why VXX consistently underperforms despite tracking VIX movements short-term, emphasizing the critical distinction between the exchange-traded note holding VIX futures versus ETFs holding physical shares. The contango effect was illustrated through the current curve showing front month VIX futures at 19.50 while next month trades at 20, creating a 50-tick loss on each monthly roll that occurs roughly 80% of the time. Historical returns demonstrated the devastating impact: negative daily, weekly, monthly, and annual returns culminating in 98% losses over five years despite VIX remaining range-bound. The segment emphasized VXX works only as short-term hedge (hours/days) during volatility spikes when backwardation briefly occurs, with Nick warning that shorting VXX carries significant spike risk requiring proper sizing to withstand potential 40-50 VIX events. The discussion highlighted how volatility of volatility expands during spikes, creating dual headwinds for short positions through both directional moves and expanding option premiums.
Comments
In Channel
Download from Google Play
Download from App Store
United States00:00
00:00
x
