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.