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Options Jive - November 5, 2025 - Options Jive: How Contango Kills VXX

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Manage episode 517835195 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://podcastplayer.com/legal.
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.
  continue reading

1704 episodes

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Manage episode 517835195 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://podcastplayer.com/legal.
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.
  continue reading

1704 episodes

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