When the market sells off quickly, traders get excited and rush into VXX, UVXY, and other volatility instruments. I'm holding XIV as a long term trade. I have to make a confession. I'm getting crushed on this trade.
Despite getting crushed in the short term, I have little concern that this will be a tremendously profitable trade. History shows long volatility to be a losing proposition long term.
The reason I have absolute confidence in this trade despite the instant surrounding is that I did it in 2011. I shorted VXX on Aug 9, 2011 at 32, I shorted again on 8/19/11 at 42.
Ignore the VXX split adjustments. My 2011 trade looked liked this: Short term pain, long term gain.
The risk I take in doing this trade is not so much financial, it is the risk that my violations of every trading rule I have becomes a habit.
