The iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) fell to a fresh record low on Monday despite concerns over the Cyprus bailout as the country’s banks remained closed to prevent a run.

The exchange traded product lost more than 1% on Monday even though the CBOE Volatility Index, or VIX, rose 1.3%. The disparity is a reminder that VXX and other volatility-linked products are designed to track VIX futures contracts, not the spot price investors see quoted. The VIX is known as Wall Street’s fear gauge. [VIX ETFs: An Imperfect Hedge]

VXX is down 70% for the trailing 12 months as the exchange traded note has been clobbered by a falling VIX and “contango” in VIX futures. Volatility products are designed to “roll” the contracts over periodically to maintain exposure to VIX futures. They can lose money on this trade when longer-dated contracts are more expensive than the front-month contract, or when markets are said to be in contango. [Volatility ETFs: VIX Drops Below 12 for First Time Since 2007]

VXX has fallen 35% year to date, yet the ETN has seen net inflows of $569 million, according to IndexUniverse.

The VIX itself started the year around 18 and recently fell below 12 for the first time in six years, while the index has averaged 25.8 from 2008 through 2012, The Wall Street Journal reports.

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