Options Jive

Monday – Friday | 8:40 – 9:00a CT

VXX & Reverse Splits

Options Jive

VXX just made its fifth 1 for 4 stock split. Tom and Tony discuss being short this product and how profit expectations might not match the reality of what you can make in this product.

VXX is based on a portfolio of the nearest two VIX futures. When these futures are in contango (which is 88% of the time), a slow decay occurs in this product, leading to reverse stock splits. According to historical price data, this stock's starting price was over $100,000 for one share. However, this clearly wasn’t the case and the data has been augmented to take into account the splits. In 2009, the starting price was originally $104.58 per share. Without the adjusted splits, VXX would currently be trading at $0.012.

Be sure to tune into hear Tom and Tony break down this product and how much you could have made being short the whole way down-- it might not be what you think!

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