Thursday, January 7, 2016

These Vehicles Are Ticking Time Bombs

The market has started the year under pressure.  China has been a mess and now we hear that billionaire trader George Soros thinks that we might be in a 2008 situation all over again.
During volatile times, a lot of investors tend to gravitate to a few volatility vehicles; TVIX, UVXY, VXX.  These vehicles are complicated, and most investors don’t understand them. The most frequently asked questions are; why is the VIX up 10% and the VXX is only up 2%? Now and then you can and will make a significant amount of money in them, but these vehicles are ticking time bombs.
Below is an article from September 2015 that gives you a thorough explanation why you are better off staying away from being long these vehicles for too long.
Over time, this cost adds up, and is the primary reason VXX is down an eye-popping 99.6 percent since its launch, and down significantly in every year since inception. Fluctuations in the underlying VIX Index matter, too, but over longer-term horizons, contango are what’s been killing returns for the ETN.–ETF.COM
A perennially poor performer, VXX and similar products such as the ProShares VIX Short-Term ETF (VIXY | B-61) and the VelocityShares VIX Short-Term ETN (VIIX | B-62) have lost tremendous value over virtually every time period.Since its inception in January 2009, VXX is down 99.6 percent; from a year ago, it’s down 2.8 percent; and year-to-date it’s down 15.1 percent.

Read the rest of the article here 

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