VIX ETFs Stable Despite Stock Wipeout

June 9th at 7:35am by Tom Lydon

U.S. stock futures were higher in Thursday’s premarket as exchange traded funds were hoping to snap a six-day losing streak. Investors are worried about a slowing economy, the end of stimulus and this week’s rumblings from OPEC.

Yet Wall Street’s “fear gauge” and ETFs that track CBOE Volatility Index futures haven’t seen a dramatic move higher.

The VIX tends to spike when markets become unsettled and the cost of protection in options markets rises. The exchange traded funds and notes track VIX futures, rather than the spot price. They can lag spot VIX when futures are in “contango.”

“We did however continue to see the VIX continue to creep higher, closing well above 18, and recall that last Friday it briefly crossed the 200 day moving average of 19.13, and recently the options flow in the index have consisted of put buyers who likely believe that volatilities in the marketplace will taper off in the near term, so we await more signals from the capital markets on that end,” said Paul Weisbruch at Street One Financial in a note this week. [A Tepid Response From VIX Index ETFs.]

The VIX nearly touched 19 on Wednesday, and this is one of its highest closes since March. Mid-March last year it hovered near 30, and was regularly trending toward 30 for most of Summer, says Mark Gongloff for The Wall Street Journal.

ETFs and ETNs that track VIX futures include VelocityShares Daily 2x VIX Short ETN (NYSEArca: TVIX) , iPath Long Enhanced S&P 500 VIX (NYSEArca: VZZ) , iPath S&P 500 Short Term Futures ETN (NYSEArca: VXX) and ProShares VIX Short-Term Futures (NYSEArca: VIXY).

ProShares VIX Short-Term Futures


Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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