ETF Trends
ETF Trends

Despite the lingering geopolitical uncertainty induced by the crisis in the Crimea peninsula, CBOE Volatility Index-linked exchange traded funds are still reflecting a relatively complacent market. However, investors have been quietly funneling money into the VIX funds.

The so-called VIX, or “fear” gauge, shows the market’s expectations of volatility and is widely used as a measure of market risk. The VIX is comprised of options contracts on the S&P 500.

The index has a long-term average reading of about 20 – readings above 20 are said to reflect volatile market conditions, whereas readings below 20 mirror complacent conditions. Consequently, the VIX and the broader stock market tend to move in opposite directions as investors expect less volatility in a trending bull market.

Currently, the VIX hovers around 14.5, which is near its average over the past 200 days, writes Chris Dieterich for the Wall Street Journal.

In February, after the VIX reached a high of 21.44 and the S&P 500 dipped to its 2014 low, the VelocityShares Daily Inverse VIX Short-Term ETN (NYSEArca: XIV) briefly surpassed iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) in assets. [A New King Among Volatility ETNs]

However, the trend has since reversed as investors anticipate rising volatility. Since Feb. 7, VXX, which tries to reflect the price movements of VIX futures, has attracted $280 million in assets, whereas XIV, which takes the inverse or -100% price movement on VIX futures, saw $149 million in outflows.

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