Aug. 8 at 4:29 PM
$VIX below 15 does NOT automatically mean volatility is cheap.
Here’s the trap:
You can’t directly buy the
$VIX index. The tradable proxy is
$VIX futures, and the front month is around 17 while spot
$VIX sits below 15.
That matters for
$VXX and
$UVXY, which get exposure through short-term
$VIX futures.
Think about what you’re actually paying for:
$VIX spot → <15
Front-month futures → ~17
You’re already paying a premium to spot volatility.
And when the futures curve is in contango, constant rolling can create a structural drag on
$VXX and
$UVXY.
So a low
$VIX ≠ cheap volatility products.
In fact, structurally, contango tends to favor the short side over time.
Not saying to short
$VXX or
$UVXY - volatility can explode without warning.
Just something most traders overlook.
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