How Low Does It Go? The Ever-Cratering VIX (VXX)

The S&P 500 Volatility Index, also called ‘The VIX’ or ‘The Fear Index,’ is showing to be at some incredibly low levels.  In fact, The VIX just dipped under 14.00 today at 13.97 to be very close to the lows of the year (13.66).

Generally speaking, a lower and lower VIX comes as stock market rallies go on and on.  It also generally means that buying put option protection to lock in large gains on many key positions is generally very cheap.  That is of course not always the case, but by and large that is how investors look at the index.

There are several ETF and ETN products out there which track volatility, but the iPath S&P 500 VIX ST Futures ETN (NYSEMKT: VXX) is extremely liquid and it has already traded almost 30 million shares today. Be advised that this is a note rather than a fund and it also has month-to-month rolling issues that the rest of us call time-value decay.

The description of the note is as follows: The investment seeks to replicate the S&P 500 VIX Short-Term Futures Total Return Index, giving exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 index at various points along the volatility forward curve.  This ETN did hit a yearly low today of $11.17 against a prior 52-week range of $11.42 to $59.18.

The chart over the last three years pretty much shows how this acts through time.