Vix ETFs Spike On Fiscal Cliff Countdown
VIX ETFs spike as fiscal cliff approaches with no resolution in sight.
Vix ETFs posted sharp gains today and VIX, the CBOE S&P 500 Volatility Index, also known as the “fear index,” jumped as investors sought protection from possible stock market declines should the U.S. economy go over the fiscal cliff.
With just five days remaining to the fiscal cliff and a looming budget ceiling debate, investors are bidding up the price of VIX and VIX ETFs as the prospect of going over the fiscal cliff grows more likely. Read “ETFs, Stocks Drop As Fiscal Cliff Approaches”
VIX spiked 9.19% today to close at 19.48, above both its 50 and 200 day moving averages and now close to near its long term average of 20.
VIX ETFs followed suit:
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): +5.57%%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options.
VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): +11.7%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.
iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ): +1.57%, This ETN is designed to track volatility in the markets as measured by the CBOE Volatility Index futures contracts.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): -5.33%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.
Bottom Line: Volatility as measured by VIX and VIX ETFs has been in a sharp uptrend since making a recent low on December 18th as likelihood of a deadlock over the fiscal cliff and budget ceiling grows more likely. The fiscal cliff was created during the last budget ceiling stalemate in August, 2011, during which time VIX reached a high in the mid-40s and stock prices fell more than 15%. During that same period, iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) reached a high of $227 versus today’s closing price of $33.74.
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