volatility trade

  The vxx volatility etf appears to be a flawed instrument. The problem, as i see it, is that the etf has to constantly roll futures contracts to maintain the proper exposure to volatility, and in doing so is forced to sell cheaper, near term futures contracts to buy more expensive further out contracts. This phenomenon is consistent as long as the vix futures are in contango. Although,there is no way to avoid the resulting decay element of the etf i think there are ways to control losses and still have protection against a vol explosion. A typical trade that i would execute would be to sell 100 contracts of the vxx(currently about 27)/ buy 2 april 30 calls(for 2.60 each)/sell 1 april 23 put(collecting 1.33). Make no mistake about it, this trade is paying for insurance and is not designed to make money. the trade cost a total of $380, but if vol explodes you will end up being long 100 contracts. If the more likely scenario unfolds and we have a continued decline in vol due to the fed policies than the vxx declines and it becomes a scratch below 23.