By Robert Zingale
With the resolution of the fiscal cliff, the S&P 500 gained much needed support. However, investors remain cautious in the market as evidenced by the 1st to 2nd month VIX future term structure.
During 2013 to date (1/15), 2nd month VIX futures have remained in my opinion attractively above the 1st month VIX futures. This generates high roll costs as iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) maintains its one-month weighted average exposure.
Therefore, I plan to short VXX in an effort to generate profits as VIX futures roll.
Additionally, the 4th to 7th month VIX futures have been experiencing a steep upward slope, leading to a roll cost drag on iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ). As a result, I will also plan to short VXZ in addition to my short VXX position.
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