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You could do a spread, but that caps your gains, and as long dated as I go (typically 90 days), I want to be able to capture as much gain as possible, particularly in case if it ever does go against me. And yes, I am primarily relying on the negative roll -- "relying" is a strong word though -- just go look at the chart. Other than April 2010 (28% loss) and mid July 2011 (56% loss), there has never been a 90 day period that the VXX did not lose money. Those are the WORST case possible results too -- requiring an enter on the absolute lowest spot VXX had been in a while and exiting at the highest. Average return? About 20% per month. How do you do this? Simple, buy 90 days out, as soon as you hit a 10% plus return, sell and roll to another 90 days out. Frequently I'll wait for a small pop. For instance, I' just sold my September VXX puts today, after holding for less than a week, for a 16.9% gain. I'll wait for a pop, then enter another 90 days out. As always, position sizing is key. I'm fully expecting, sooner or later, a 20-40% negative hit. But let's look at a $10K investment, assuming a fifty percent negative hit one month a year. Even if I am only getting 10% per month, I end up WAY ahead. 11/12 months, I get $1,000.00. One month I lose $5,000. That's a net gain of $6,000 on a $10,000.00 investment -- or 60% on the year. Even if I have TWO fifty percent losses on the year, I still break even. (10/12 10% gains = $10K 2/12 50% losses = -$10K). And I've been averaging a LOT higher than 10% per month. (Since I started doing this, I'm averaging 19% per month). Do I want to allocate more to this trade? Sure it seems a GREAT idea to put 50% of my portfolio on it. But I wont do that. I NEVER allocate more than 10% of a portfolio to a trade. And if you keep your position sizes constant, the surprise result doesn't hurt. Heck, even if you had a 100% loss one month, and a 10% gain the other 11 -- you STILL END UP AHEAD. This negative roll thing is great. Again, if anyone sees problems with this, please let me know, I'm always interested in improving strategies. For about the last nine months though, I feel like I'm shooting fish in a barrel.

I've had a great trade for the last two years now: 1. Buy DITM, far dated, VXX puts. I challenge you to find ANY 180 day period where the value of the VXX did not drop. (When looking at the chart, don't forget that VXX has gone under several reverse splits and account for those). 2. Hold until you have a 10-15 % return. Sell, open again 180 days out. I have yet to lose on this trade. It requires patience, as sometimes VXX does increase, and you have to watch your portfolio balance get crushed, but it comes back down. Will this always work? I highly doubt it, either (a) we'll have a prolonged crash as we did in 2008 and I'll get torched, or ( people with bigger wallets who are smarter than me will price me out. E.g. allocation is key. I never have more than 3-5% of my portfolio in this trade. I also find it very interesting that Barclays ADMITS they take the opposite side of this trade every month, and make a killing doing it. In other words, they know this instrument is a POS, that will always lose value, but they market the crap out of it, attract billions of dollars into it, then make money taking the opposite position while at the same time making money on loads, management fees, and commissions. I'll leave the ethics of that too you, but if the company who designed it, takes very large positions against it regularly, that should tell you all you need to know. Again though, I can't emphasize enough, understand the risk involved in naked puts.

if you trade enough contracts that you can trade in a ratio the different price of VIX and VXX is the least of your issues. You are facing the same problem on VIX as with VXX though as you dont buy calls on VIX spot but on the VIX future. Take today. As I write this the VIX spot is 13.90 and the April future is 14.40, the May future is 15.55 if VIX spot stays unchanged until the April future expires the future will converge (pretty much) to the VIX spot - so 13.90. If you buy a 14 Call with April expiry it is in the money now but it will expire worthless at expiry in above scenario. So as you trade VIX futures or option on it you face the same issue as if you trade VXX - the futures drift down the curve towards spot (assuming contango and VIX spot pretty unchanged - to see 'the curve' have a look here.) The difference between VIX and VXX is that VIX has a fixed maturity (if you trade VIX April futures or options the maturity will shorten every day and it will expire/settle on April expiry) whereas VXX keeps rolling from front to back month future to maintain a 30 day maturity. So right after the Mar VIX future expires it will be 100% in April futures (so ~30 days maturity) and with every day passing it will sell some April and buy some May so that the average weight is ~30 days maturity. If you have VXX vs VIX right after the Mar expiry you have the same thing but then every day your VIX position becomes shorter dated while VXX will maintain a 30 day exposure to VIX futures which gives that spread a dynamic which is hard to control in my opinion. You don't make money because VXX will drifts down and VIX doesn't - which seems to be you idea if I understand you right. As explained the futures also drift down. You might make money IF just before your options expire VIX spikes a lot as then you are long an option on a future which also expires in a few days and is therefore more sensitive to a VIX spike and you are short an option on an underlying (VXX) that is essentially a position in mostly back month future which will be less sensitive to a sudden spike in VIX hope that makes sense. Marco.