How to Trade with VXX

Those of you who have taken my Volatility Trading Course or are in Chairman’s Club have learned that VXX leads the market. The behavior of VXX intra-day is often in precursor to prices in the S&P. This was true again yesterday.

If you look at the pre-market prices of VXX and the S&P futures yesterday you will see a large divergence. The S&P futures were up over 1/2 percent at one point before the open yet VXX was unchanged (it should have been down at least 1%). The futures then stalled and then moved lower the next few hours.

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We have seen and discussed this behavior before. When the S&P and VXX diverge from where they should be trading relevant to each other, VXX usually has the final say. And yesterday it was saying very early on “lower prices for the S&P futures are coming”. And that’s the way it played out.

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