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IPFS News Link • Economy - International

First Victim Announced: A $300M VIX Fund Goes Poof

•, by Mike Mish Shedlock

Bloomberg reports Volatility Jump Has Traders Asking About VIX Note Poison Pill.

The Cboe Volatility Index's biggest rally ever is raising thorny questions about the future of exchange-traded products tied to the gauge.

An ETP meant to mirror moves in the front of the VIX's futures curve plunged more than 75 percent in after-hours trading following an 80 percent spike in contracts that comprise its underlying index during the trading day, potentially putting in play triggers that would enable the fund's owners to liquidate it to avoid losses.

The surge in volatility has already claimed one victim: Nomura Europe Finance announced the early redemption of its Next Notes S&P 500 VIX Short-Term Futures Inverse Daily Excess Return Index ETN, which had 32.4 billion yen (approximately $300 million) in assets.