On Monday, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) hit a record low, losing more than?1% on Monday as the VIX increased 1.3%, reported ETFTrends.com.
This discrepancy serves as a friendly reminder that VXX as well as other volatility-linked products track VIX futures contracts but not the quoted spot price. ?
In addition, for the trailing 12 months,?VXX is off 70% thanks to a declining VIX and the VIX futures contango; year-to-date, it has dropped 35%.?
This fall comes on $569 million in net inflows, according to IndexUniverse and it is part of a ?trend of growing inflows into the exchange-traded products this year (ETP). In this quarter, $520 million-plus has gone into two frequently used ETPs: the?ProShares Ultra VIX Short-Term Futures ETF?(UVXY) and?VelocityShares Daily 2x VIX Short-Term ETN?(TVIX), as reported by Bloomberg News? Nikolaj Gammeltoft?and?Cecile Vannucci.
Furthermore, the tracker of this index,?Barclays iPath S&P 500 Short-term VIX Futures ETN?(VXX), has grabbed a greater amount of cash: $620 million, according to?XTF?data as noted by Barron’s Brendan Conway.
Some of the increased inflows comes from playing the Cyprus game but what happens to these products when there’s not international turmoil to raise the stakes and there’s a decline in value?
Dominic Salvino, a specialist on the CBOE floor for?Group One Trading said to Barron’s,??Mounting losses are the price owners pay for insurance against bigger equity declines,?You?re buying protection against bad things happening, and when bad things don?t happen and you lose your premium, then most people don?t complain.??