VIX Note Used to Ride Volatility Lower Shows Fear Ahead
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When volatility soared over the last three years, traders would often profit by buying up shares of a popular exchange-traded note that bets on the gauge to inevitably fall. This time, they’re being more cautious.
Three weeks after the VIX, a measure of expected price swings on the Standard & Poor’s 500 Index, soared to 40.7 on Aug. 24, inflows into the VelocityShares Daily Inverse VIX Short-Term ETN, known as XIV, have dried up. That’s even though the VIX remains about 70 percent higher than its average for 2014.