Easing Out of a VXX Pair Trade

On Feb. 16, I entered a pair trade, going long March $138 puts on the SPDR S&P 500 (SPY) paired with March $31 puts on the iPath S&P 500 VIX Short-Term Futures ETN (VXX) for a net cost of $9.02.

The intrinsic value was $5.33, and the trade took a bit of a bumpy road at the beginning, but volatility has been crushed over the past two days as the market has trended sideways. We remain in a position of steep contango between the VIX cash and March VIX futures as well as between the March VIX futures and the April VIX futures. This spells double trouble for VXX. However, I am not going to be overly greedy on this trade. As quickly as it can move for you, as we've seen over the last two days, that's how quickly it can move against you, as I witnessed the two days prior....217 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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