Add it the list of ETFs and ETNs that do a horrible job of tracking what they’re supposed to.
The challenges of ETFs which rely on futures is well-known. You can see UNG and USO, plus several bond funds as good examples.
Sadly, if you want to play volatility (or the VIX) from the comfort of your e-trade account, without having to learn about options, you’re out of luck, because the iPath S&P 500 VIX Short-Term Futures ETN (VXX) doesn’t work.
So how has the ETF VXX done in comparison to the VIX futures? In a word: HORRIBLE!! It hasn’t always been so. But in the last 3-1/2 months, the performance of VXX has been devastatingly bad.
On July 8, the VIX closed at 31.30, VXX closed at 74.40, and our CRVF [Constant Rolling VIX Futures] index closed at 31.37 (July futures at 30.80, August at 31.80). As noted above, last night the VIX closed at 24.83, CRVF closed at 24.98. VXX, however, closed at 43.18.
Do the maths. VIX down -20.7%, VIX futures down -20.4%, VXX down a horrible -42.0%. And remember folks, this is not a double leveraged ETF portfolio. But it’s still twice as bad!
Here’s a chart that shows just how terrible things have gotten.
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