Thu, Mar 22, 2012 | Jared Woodard
Some investors noticed a moment near the close of trading today during which VXX briefly was negative on the day. Here are the last couple days of VXX trading, plotted in 5-minute bars.
Source: TD Ameritrade
Those same investors probably clicked over to the CFE’s website and noticed that the VIX futures closed higher on the day. More than one person claimed that this was an indication of some kind of horrible tracking error or failure on the part of the VXX product. The chart below shows the last couple days of trading in the VIX April contract, also plotted in 5-minute bars.
Source: Interactive Brokers
See the difference? Me neither. The April VIX contract gained $0.25 on Thursday, up 1.3%. VXX gained $0.22, up 1.2%. Once you factor in the presence of just a little May futures exposure in the VXX calculation, it sure looks like there was nothing to get excited about.
I know it’s in vogue to slam volatility ETPs in general as somehow broken or dangerous, but in this case there’s no evidence that VXX did anything except exactly what it was supposed to do.