Investors are pulling cash from volatility-linked exchange traded funds, withdrawing a chunk of the money they had recently put into the ETFs for insurance against market pullbacks.

The CBOE Volatility Index, or VIX, was down about 6% on Friday to trade near the lowest levels in a year. The benchmark rises when investors are more fearful.

Volatility-linked exchange traded funds and notes are designed to track VIX futures contracts, rather than the spot price.

The largest fund in the category is iPath S&P VIX Short-Term Futures ETN (NYSEArca: VXX) with about $1.5 billion in assets.

Traders piled into the ETN last week, with total inflows totaling nearly one-third of total assets. [Why Trading in VIX ETFs is Surging]

VXX is trading lower “as it seems that institutional players are posturing for declining levels of volatility in the market after the early week equity correction,” said Paul Weisbruch, head of ETF/options sales and trading at Street One Financial.

“VXX has also seen considerable outflows this week, with more than $200 million leaving the fund via redemption activity,” he said in a note Friday. “This comes about a week after the fund saw more than $600 million enter the fund, prior to the sudden but short spike in the VIX itself.”

From a technical standpoint, the VIX is falling after a brief spike earlier this week to its 50-day exponential moving average.

“The indicator failed to hold at that resistance level and has since reasserted its downtrend of the past several months,” says Investors Intelligence analyst Tarquin Coe.

“Given the sharp move on Tuesday, momentum is a good distance above oversold, so the VIX has the slack to allow a break down to new 2012 lows. Proven support on the fear gauge is at 15. Falling to there would imply the S&P 500 running up to the 1400 level before market participants may feel the need to buy protection (which would cause the VIX to bounce),” he added.

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