Options Insight: How to Play VXX

The video tutorial discusses the current state of the VIX and its futures curve, highlighting expectations of rising volatility. It explains the concept of term premium and the impact of unknown events on market volatility. The VXX, an ETF tracking volatility, is analyzed, noting its behavior and reverse splits. A trading strategy involving VXX options is proposed, aiming to profit from the expected decline in VXX.

What is the primary reason for the steepness in the VIX futures curve?

• Increased trading volume

• Reversion to the mean and term premium

• Decrease in market liquidity

• High spot VIX levels

What does the VXX ETF primarily track?

• The Dow Jones Industrial Average

• The volatility of volatility

• The NASDAQ Composite

• The S&P 500 index

Why does the VXX chart appear as a flat line on long-term charts?

• It is not actively traded

• It tracks a stable index

• It has undergone many reverse splits

• It has never been popular

What is the goal of the trading strategy involving the VXX?

• To hedge against currency fluctuations

• To profit from the roll down in the VXX

• To minimize exposure to the VIX

• To profit from a sudden rise in the VXX

Which options are involved in the VXX trading strategy?

• Buying the VXX January 25 call, selling the 24 put, and selling the 22 put

• Buying the VXX January 25 put, selling the 24 call, and selling the 22 call

• Buying the VXX January 25 put, selling the 24 put, and selling the 22 put

• Buying the VXX January 25 call, selling the 24 call, and selling the 22 call