3 VIX ETFs Surge as U.S., China Trade War Escalates

The Cboe Volatility Index, or so-called VIX, along with related VIX ETFs jumped Monday as the fear gauge reflected traders’ increasing anxiety over the potential fallout of an escalating trade war between the U.S. and China.

On Monday, the iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) increased 15.6%, ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) jumped 14.9% and the leveraged ProShares Ultra VIX Short-Term Futures (NYSEArca: UVXY), which provides the 2x or 200% daily performance of the S&P 500 VIX Short-Term Futures Index, advanced 22.1%. Meanwhile, the CBOE Volatility Index surged 28.5% to 17.7.

Potential traders should be aware that VIX exchange traded products track the futures market and not the spot price of the VIX.

After President Donald Trump raised the stakes last week on tariffs against Chinese products, President Xi Jinping said China will strike back, the Wall Street Journal reports.

“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” the Chinese president said, according to the people. “In our culture we punch back.”

How Beijing Could Respond to U.S.

Beijing could respond to Washington D.C.’s actions by holding up merger and acquisition deals involving U.S. companies, delaying licenses, ramping up inspections or steering its 1 billion-odd consumers to shun American products. The U.S. exported less than $200 billion in goods to China last year, so Chinese officials said they would have to take “qualitative” measures to retaliate, such as forcing increased inspections at U.S. companies and delaying regulatory approvals.