Two popular exchange traded notes that tracks CBOE Volatility Index, or VIX, futures are set to mature. Nevertheless, volatility traders can still gain exposure to the VIX through other ETNs.
Barclays Bank PLC, the underwriting bank behind the line of iPath ETNs, recently highlighted the upcoming maturity of the iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) and iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VXZ), which are scheduled to mature in January 30, 2019.
“The Closing Indicative Value (the ‘CIV’) on the final valuation date (January 29, 2019) for each of the Maturing ETNs would be the final cash settlement value received by holders of record on the final redemption date,” according to a Barclays note.
So, if a trader continues to hold onto VXX or VXZ, one would receive the cash equivalent on the closing date. On the other hand, traders may also exit the position ahead of time.
ETNs are debt securities
Unlike exchange traded funds, ETNs are debt securities issued by financial institutions that promise to pay the return of an index, minus fees and taxes. The underwriting banks, like Barclays, will typically set an ETN to mature between 20 to 30 years after they are issued. Consequently, ETNs come with a defined date for closure.
In anticipation of the final redemption date for the maturing VXX and VXZ, Barclays launched the iPath Series B S&P 500 VIX Short-Term Futures ETNs (BATS: VXXB) and the iPath Series B S&P 500 VIX Mid-Term Futures ETNs (BATS: VXZB) for those whom continue to track VIX futures moves. Both of the new Series B VIX ETNs will trade in parallel with the old VIX ETNs until the final redemption date of January 30, 2019.
This is not the first time Barclays closed its iPath ETNs due to maturity and adopted a new Series B to replace the old ones. The bank recently converted 17 iPath Series B commodity-related ETNs and also returned the suite to its old tickers. For example, among its more popular plays, the iPath Series B S&P GSCI Crude Oil Total Return Index ETN (NYSEArca: OIL) replaced the older iPath Crude Oil Futures ETN (NYSEArca: OIL), and the Series B Oil ETN also adopted its predecessor’s “OIL” ticker.
For more information on exchange traded products, visit our ETF 101 category.