- Well-intentioned, but uniformed investment advisors
- Unsophisticated retail investors and traders
- Fear-driven money managers. investors and traders who buy insurance ahead of or during major events
- Short-term speculators who understand VXX and are bearish. They know if they can time VXX, they can potentially make quick money because VXX rises quickly in times of stress
- Gamblers seeking action. Because VXX rises quickly, the gamblers are looking for quick scores. It fits their mentality.
- VXX has inherent erosion in place due to contango
- VXX owns overpriced VIX instruments
- The buyers of VXX as a whole, are not a sophisticated group. When you ask yourself “Who is on the other side of my trade”, the answer is usually not the major quant hedge funds with teams of Ph.Ds. It’s the above group, which are as a whole a few notches (ok, many notches) below the smarter more sophisticated money that trades the market.
Enjoy your trading!
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