Understanding VXX and VIX Futs

Folks seeing a lot of questions about why the VXX is not moving. I discussed much of this in the Monday video but I am going to try to quickly go over this here in very simple terms. 

The VXX is composed of the 2 closest month VIX Futures contracts. Currently, it is made up of almost all October (96%). So for the next few days whatever happens with the Oct contract the VXX will follow.

October contract (and VXX) are freely traded by VIX futures traders. 

The October VIX Contract will always be at the same price as the Spot VIX on expiration day (Oct 21 in this case)

So what the VIX Futs traders are doing is making bets on where the spot VIX will be on Oct 21.

Currently, the Oct VIX futs are 14% OVER the spot VIX.

So in essence the sentiment is currently that they do not think that on Oct 21 the spot VIX will be more than 14% higher than it currently is (this is still a long way away)

This is why the Oct VIX futs are subdued and in turn why the VXX is subdued

This sentiment can (and does) change very quickly on these VOL products but this is what the VXX and the VIX futures are reading.

This sentiment is all reflected in the charts and why we are able to read the charts using EW and why the VXX hits the fibs so well.