VXX Is Trading; No Sign of VXY Yet

Of the two new VIX ETNs, I see that VXX is trading this morning, but I have not seen any activity in VXY, perhaps because it is not yet trading. [Edit: a commenter noted that the correct ticker for the 5 month VIX ETN is VXZ, not VXY]


VXX opened at 100.11 and is currently trading at 101.49.

Some brokers are picking up the VXX ticker today and some appear to not yet have it in their system. The graphic below is from optionsXpress. The NYSE and Yahoo Finance are among those web sites that already have VXX information available.

[source: optionsXpress]

Spot VIX vs. VIX Five Month Futures

Tuesday I went the analogy route in Thinking About the New VIX ETNs. Today I thought I should try the direct route and show a graph of the difference between the cash/spot VIX and the VIX futures five months out.

Keep in mind that the Barclays VIX ETNs, which are scheduled to begin trading tomorrow, target constant weighted average futures maturities of one month (VXX) and five months (VXY). The methodology used to achieve the constant maturity involves the blending of different proportions of various futures maturities each day. The chart below is slightly different in that it utilizes VIX futures with five months to maturity, but only rolls the contract out once per month. Nevertheless, it provides a very good approximation of the difference between the cash/spot VIX and the VIX futures with five months to maturity. Apart from confirming the large difference between current volatility expectations and expectations 5 month out, the peaks and particularly the valleys in the differential between the VIX and VIX five month futures show a high degree of correlation to the peaks and valleys in the SPX during the same period.

Something to think about, anyway, as the VIX ETNs near the starting gate.

And yes, these principles are similar to what I have talked about at some length with respect to the VIX:VXV ratio. For the record, the VIX:VXV ratio sits at 0.976 as I type this, slightly bearish, but consistent with the tight range this ratio has been in over the course of the past month.

[source: FutureSource.com]

For some additional perspective on the new VIX ETNs, check out:

• Should You Trade the VIX ETNs (Condor Options)
• VIX ETN Not a Wild Enough Ride (Jim Wiandt, IndexUniverse)
• Gimme Some ETNs (Daily Options Report)
• Barclays Readying ETNs Tied to VIX Futures (John Spence, MarketWatch)

…and for those who may have missed it, I published some initial thoughts on VIX ETNs from the top bloggers over the weekend in Barclays VIX ETNs Slated to Begin Trading on Friday.

Barclays VIX ETNs Slated to Begin Trading on Friday

Information pertaining to the two new VIX ETNs is hard to come by at this point, but Jamie Tyrrell’s (optionMONSTER) Volatility Sonar report from Friday indicates that a Barclays representative is talking about a launch this Friday, January 30^th.

While I am not sure if the tickers have been finalized, I just now discovered an August 27, 2008 prospectus that describes the ETNs at some length and lists a VXX ticker for the iPath S&P 500 VIX Short-Term Futures ETN and a VXY ticker for the iPath S&P 500 VIX Mid-Term Futures ETN.

After I have had a chance to study the prospectus I will offer up more on these new ETNs.

In the meantime, some of the usual suspects have already offered some thoughts on the subject:

• New VIXes on Tap? (Daily Options Report)
• VIX Futures Are Not Always a Volatility Play (Don Fishback’s Market Update)
• A Bit More on the VIX ETN (Don Fishback’s Market Update)
• Update on VIX ETNs (Don Fishback’s Market Update)
• Potential New VIX Product – Beware!! (Don Fishback’s Market Update)
• New ETN Will Give Investors Access to Volatility (Kevin Grewal, ETF Trends)
• New VIX ETN Coming? (Distressed Volatility)