Exchange traded funds tracking CBOE Volatility Index futures contracts are experiencing a swift decline as the VIX dropped below 30 on Friday.
Wall Street’s “fear index” is losing ground on easing tensions over the Eurozone debt crisis and optimism over third-quarter earnings reports.
The iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX), an exchange traded note that tracks VIX futures contracts, was down 4% at last check Friday. ProShares VIX Short-Term ETF (NYSEArca: VIXY) was down about 4% as well.
The VIX plunged 28% in the six trading sessions through Tuesday, a record 19-year drop, before earnings come out, report Cecile Vannucci and Jeff Kearns for Bloomberg. The index continued to decline 6.6% through Wednesday. [ETF Chart of the Day: VIX]
“On Thursday, VIX options were active once more and this time around we saw buyers of October 35 calls,” Paul Weisbruch, head of ETF/options sales and trading at Street One Financial, said in a research note. “This contrasts with the recent trend of put buying we have pointed out repeatedly as the VIX has fallen quite sharply in the past few sessions.” [A Look at Recent Trends in ETF Options Trading]
The VIX fell below 30 on Friday and the lower end of its recent trading range.
“We were very nervous, and rightfully so, about Europe,” said John Farrall, director of derivatives strategy at PNC Wealth Management. “Now earnings have taken the forefront of attention, and corporate profits are supposed to be good.” [Dow ETF Rallies to 2011 Gain as VIX Plummets]
“We point out that VXX options also have been exceptionally active in recent sessions amidst the plunge in the VIX, which has corresponded with a broad based rally in the equity markets,” Weisbruch added.
iPath S&P 500 VIX Short Term Futures ETN
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Max Chen contributed to this article.