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Options Insight: How to Play VXX

Options Insight: How to Play VXX

Assessment

Interactive Video

Business

University

Practice Problem

Hard

Created by

Wayground Content

FREE Resource

The video tutorial discusses the current state of the VIX and its futures curve, highlighting expectations of rising volatility. It explains the concept of term premium and the impact of unknown events on market volatility. The VXX, an ETF tracking volatility, is analyzed, noting its behavior and reverse splits. A trading strategy involving VXX options is proposed, aiming to profit from the expected decline in VXX.

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5 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the primary reason for the steepness in the VIX futures curve?

Increased trading volume

Reversion to the mean and term premium

Decrease in market liquidity

High spot VIX levels

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What does the VXX ETF primarily track?

The Dow Jones Industrial Average

The volatility of volatility

The NASDAQ Composite

The S&P 500 index

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Why does the VXX chart appear as a flat line on long-term charts?

It is not actively traded

It tracks a stable index

It has undergone many reverse splits

It has never been popular

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the goal of the trading strategy involving the VXX?

To hedge against currency fluctuations

To profit from the roll down in the VXX

To minimize exposure to the VIX

To profit from a sudden rise in the VXX

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which options are involved in the VXX trading strategy?

Buying the VXX January 25 call, selling the 24 put, and selling the 22 put

Buying the VXX January 25 put, selling the 24 call, and selling the 22 call

Buying the VXX January 25 put, selling the 24 put, and selling the 22 put

Buying the VXX January 25 call, selling the 24 call, and selling the 22 call

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