Don Dion's Weekly ETF Blog Wrap
This past week on RealMoney, Don Dion blogged about ETNs designed to track the VIX, Eastern Europe ETFs and Brazil.
VIX-Based ETN Correlations Are Skewed
Posted 10/5/2009 5:20 p.m. EDT
The iPath S&P 500 VIX Short-Term Futures Index ETN (VXX) and iPath S&P 500 VIX Mid-Term Futures Index ETN (VXN) didn't capture as much of last week's pop in the CBOE Volatility Index (a.k.a., VIX) as some traders may have liked.
Between Tuesday and Friday, the VIX gained nearly 20%, but VXX only gained about 8%, while VXZ managed just 4%. On the flip-side, today's loss cost the VIX nearly 7%, but VXX shed 4% and VXZ fell less than 2%.One difficulty with the rolling futures contract is that the future never arrives. Options and futures have two components to their value:
- the underlying value of the security or index; and
- the time value.
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