Novice Trade: VXX

Well, the market tried to tank, and if it was going to, it was going to be today. The fact that the S&P 500 was down 30 and the Volatility Index (VIX) was only up less than 2 points, with almost no movement in the VVIX (the VIX of VIX), points toward a trip back below 20 for VIX. Add up the fact that VIX is in a steep contango makes owning puts in iPath S&P 500 VIX ST Futures ETN (VXX) or ProShares Ultra VIX Short-Term Futures (UVXY) extremely favorable.

I can buy the VXX March 4 put for less than $1, which seems cheap given where VXX came from at Monday's close. It will only take a day or two for this put to do extremely well if this rally continues (which I think it will, back toward 1,940). I would be looking to get out by Friday's close....8 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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