A History Of Failure Hasn’t Stopped Speculators From Trading This Note
By Callie Bost
(Bloomberg) — Speculators are again piling into an exchange-traded note that lets them bet on how long days of calm will last in the U.S. stock market.
The trade, using a six-year-old security known as VXX that sees more average daily volume than shares of Microsoft Corp. and Facebook Inc., has usually backfired amid the biggest bull market since the 1990s. That hasn?t curbed its popularity, with the iPath S&P 500 VIX Short-Term Futures ETN poised for an eighth straight week of inflows, a streak not seen in three years. Shares outstanding in the note are at an all-time high.
Bears are betting this time will be different with the Standard & Poor?s 500 Index flat for the year and stuck at the same level it reached in November. Owning the note could pay off should any number of concerns, from declining corporate profits to conflict in the Middle East, open the door to volatility in a stock market that has been mostly immune to it.
?It just feels like there?s a bit more of a worry that something could go awry,? said Steve Sosnick, an equity risk manager at Timber Hill, the market-making unit of Greenwich, Connecticut-based Interactive Brokers Group Inc. ?The winning streak of the buy-the-dips strategy could be coming to an end, as all winning streaks do.?
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