VIX Splits on the Horizon

Next week there will be a couple of price changes in the VIX Exchange Traded Product area. One will result in a higher price and one in a lower price. This is not some sort of forecast, this is the reality of what happens when a stock splits, the price changes. 

As expected by many VIX watchers, the iPath S&P 500 VIX Short-Term Futures (VXX – 8.94) exchange traded note will implement a reverse 4 for 1 split next Wednesday October 5th. This is the second reverse split for VXX since being introduced in January of 2009. If you own shares of VXX you will receive one share for every four shares you own. If you have 100, you will become the owner of 25 shares. Or, using round lots, if you hold 400 shares you will be the owner of 100 shares. As far as pricing, this is easily demonstrated as well. If VXX closes at 9.00 on October 4th, it will adjust and if unchanged the next morning the price will be 36.00.

Combining the share and price adjustment together gives us a full example –

Before Split – Long 400 VXX at 9.00

After Split – Long 100 VXX at 36.00

Do note that in both cases the position is long $3600 worth of VXX stock.

The other VIX related split is in the ProShares Short VIX Short Term Futures ETF (SVXY – 135.38). This exchange traded fund is actually going to have a more traditional 2 for 1 split that also occurs on the close October 4th with a split adjusted trading price on the 5th. To use an easy number, assume the price of this is 136.00 before the split. The post-split price would be 64.00 and a holder of 100 shares would become a holder of 200 shares.