iPath S&P 500 VIX ST Futures ETNVXX

ETF Research and Analysis

by John Gabriel

Suitability
Sophisticated traders who are familiar with the CBOE VIX Index and understand the intricacies of the VIX futures market may find iPath S&P 500 Short-Term Futures ETN VXX to be an attractive short-term risk mitigation Read more

Bull Case

Volatility futures have a strong negative correlation with equity markets and could provide downside protection during market downturns.

The tax rules for ETNs are still unclear, but at the moment futures index-tracking ETNs require capital gains taxes to be paid only upon redemption or sale. Read more

Bear Case

VXX is an exchange-traded note, an unsecured debt instrument backed by Barclays. Should Barclays declare bankruptcy, odds are that investors will not receive any amounts owed to them under the terms of the ETN.

The VIX futures curve is in a persistent state of steep contango. The resulting large negative roll yield makes any amount of insurance provided by this ETN very costly.

This ETN will not directly mimic the performance of the spot VIX Index. Read more