VIX has gotten a lot of attention as of late. It’s almost like the only time there is love for VIX is when the market is in turmoil. However, there are opportunities in low volatility environments as well. It was mentioned broadly that the assets under management for the VelocityShares Daily Inverse VIX Short Term ETN (XIV – 30.33) have surpassed the iPath S&P 500 VIX Short-Term Futures ETN (VXX – 45.46). I read this in several places, so I visited the VelocityShares and iPath websites to get confirmation. As of Friday XIV has a market cap of $817,444,820 while VXX has a market cap of $763,246,754. As mentioned, typically the popular press is all over VIX when it peaks above 20. Note that the money seems to be flowing to a fund that focuses on short volatility. Just to be clear, this is no recommendation on my part, just showing where the money has flowed in this recent VIX spike.
This past week VIX dropped almost 17% as calm returned to the equity markets. Specifically the return to contango occurred on Friday as the employment report was taken positively by the equity market. Note the February VIX Futures settled at a slight premium to VIX on Friday (15.50 vs. 15.29) after being at a discount of 0.81 points this time last week.