Up, Down, Up, Down…

Fun VIX trading fact of the day…

For the eighth day in a row now, the VIX ETP XIV (as well as VXX) has reversed the previous day’s direction. Every up day has been followed by a down day, and vice-versa.

Eight days in a row is tied for the second longest streak of reversing days in the last 10+ years for XIV and third longest for VXX. XIV’s history of consecutive reversing days since 03/2004:

20140725.01

If XIV closes down today (Friday), we’ll be tied with the all-time record.

What’s the significance of all of this?

For us, none at all. We don’t trade in such a short timeframe so we wouldn’t chase this particular observation anyways. It has led to very middling performance for the month though as these VIX ETPs can’t get traction either up or down.

For traders of the shorter-term variety, it shouldn’t hold much significance either. In a world where prices were perfectly random, we would expect to see these type of long streaks about as often as we have. In other words, this long streak of reversing days is likely just noise.

Good Trading,
Volatility Made Simple


Wonk note: Data prior to the launch of XIV and VXX has been simulated. We’re able to do this accurately using a combination of the indices and futures data on which these ETPs are based. Read more about simulating data for VIX ETPs.

Posted in Real-Time Analysis.