$VXX Huge Bet On Continued Downside Yesterday

One of the best short trades over the last five years has been shorting $VXX.  It has dropped 98% in value since its inception over 5 years ago, and it looks like it will never rally in any significant way.  It's a ticker than never goes up, so why not bet a million dollars that the downside will continue?

Yesterday someone did just that, they bought $1.125 MILLION of $VXX $20 January 2015 PUTS.  That is a heck of a lot of money for an out of the money trade, which is essentially a bet for an over 50% decline for $VXX in 7 months.  The $VXX chart is on this traders side as, since 2009,  it is down from a split adjusted $5,000 to a price of $31.  Just think about that for a second. $5,000 into $31.  These days your broker should give you a sobriety test before executing and position betting for a rise in the $VXX.

Let the record show I have bought $VXX calls on many occasion, and while admittedly I was not always sober making those trades,  I was able to secure a profit on occasion.  Last week the $VXX hit a new all time - split adjusted - low.

When you see a massive trade on a stock like $VXX,  one that, according to the chart from the last 5 years,  looks like it as a 100% chance for success, you have to wonder where the risk is in this market? And if this market has no risk, why not throw millions of dollars betting on central banks continuing to take any and all downside risk out of the market. Let's see how this trade works out in January.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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