Members of Fundamental Trends recently took hedging positions using VXX. Some own short-term VXX calls, others the VXX ETN. A very simple analysis of the VIX index shows that a target range for a rise in volatility would be about 18-25 on that index. Using simple Bollinger Bands and exponential moving average is all it takes along with a knowledge of history. Our plan is to start scaling out of positions by selling every couple points starting at 18 for VIX and the corresponding prices for VXX.
This was the prelude to opening this trade a week ago:
Hedging and shorting are incredibly difficult to do. That's not only due to having to be very good at picking spots, but the securities work against you the longer you hold.
For most people hedging and shorting is a bad idea. While you can hit home runs doing it, there are a lot of strikeouts. Think Dave Kingman if you're an old time baseball fan. He hit some home runs, but also struckout a lot. He was actually one of the first "launch angle" hitters without even knowing it. And, he did not end up in the Hall of Fame - like most short investors and hedge fund wannabes.