While the markets plunged and the CBOE Volatility Index spiked, some investors threw over a billion dollars into VIX-related exchange traded products, indicating a turn around and more complacent market outlook.
Since August 20, the VelocityShares Daily Inverse VIX Short-Term ETN (NYSEArca: XIV) has accumulated $1.1 billion in net inflows, according to ETF.com, growing almost seven fold in just two weeks to $1.28 billion in assets under management. Despite the market plunge and spike in the VIX during the selling on August 24, XIV still attracted about $345 million in inflows.
Additionally, over the past two weeks, the ProShares Short VIX Short-Term Futures ETF (NYSEArca: SVXY) brought in $540.3 million in net inflows and now has $599.9 million in assets under management.
The VIX is a widely observed indicator for investor sentiment in the stock market and measures the expected or implied volatility of large-cap stock options traded on the S&P 500 index. Exchange traded products that track VIX futures allow investors to profit during rising volatility or hedge against short-term turns.
The inverse VIX ETPs allow investors to capitalize on a falling VIX or play on a calmer market conditions.
In response to the recent market correction, the VIX jumped 82% to 51 on August 24, a level not reached since the financial crisis, reports Callie Bost for Bloomberg.
“Seeing the VIX at 50 was just chaotic,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co., told Bloomberg. “It’s not like there was a headline that a bank had filed for bankruptcy or a major corporation was teetering on the brink. Why did it move that much?”
The buying pressure in inverse VIX ETPs during the height of the recent VIX spike suggests that some investors saw the pullback as a response to panic selling, which could quickly turn around.
CBOE Holdings also recently stated that the volatile August boosted contract trading volumes to record highs, MarketWatch reports. August 21 was the CBOE’s busiest day ever, with 11.2 million contracts traded, and options for the VIX set a new average daily volume record of just under 1 million contracts.
The VIX was down 2.2% Thursday, trading around 25.5. While the VIX has edged lower over the past week, the volatility index was still trading above its historical range of 15 to 20 and well above its lows about about 12 earlier this year.
For more information on the CBOE Volatility Index, visit our VIX category.
Max Chen contributed to this article.