The iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) was down 21% from Monday’s intraday high in Wednesday’s premarket trading as global markets surged after leaders in Washington reached a last-minute deal on the U.S. fiscal cliff.

VXX is an exchange traded note designed to track futures contracts based on the CBOE Volatility Index, known as the VIX or Wall Street’s fear gauge. VXX was down 8.5% in Wednesday’s premarket after dropping over 10% on Monday. Markets were closed Tuesday for New Year’s Day. [VXX Plummets 10% on Fiscal Cliff Deadline]

VXX and other volatility products such as VelocityShares VIX Short-Term ETN (NYSEArca: VIIX), VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX), ProShares Ultra VIX Short-Term Futures (NYSEArca: UVXY) and ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) were among the worst performers in exchange traded products in 2012.

For example, VXX lost nearly 80% of its value last year. It was hurt by a declining volatility index as well as a condition known as “contango” in the VIX futures market when longer-dated contracts are higher, or more expensive, than the spot price. The products lose money on the so-called roll trade when they move into new futures contracts.

Dow futures were up about 200 points in Wednesday’s premarket after U.S. lawmakers passed a bill averting spending cuts and tax increases threatening a recovery in the world’s biggest economy, Bloomberg News reports.

“It’s an immediate positive and a short-term relief that they got the deal through,” Binay Chandgothia, a portfolio manager at Principal Global Investors, told Bloomberg. “The sustainability will depend on what comes out ultimately and how things shape up with the debt ceiling debate. There will now be protracted political negotiations.”

The opinions and forecasts expressed herein are solely those of John Spence, 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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