VXX Maturity -- Shout out to Jim Riggio

Discussion in 'General Discussion' started by BroncoCap, May 18, 2017.

  1. BroncoCap

    BroncoCap Member

    Hi Jim (and others that may know),

    I am wondering if anyone has information on what will happen to VXX when it expires Jan 30, 2019. After reading the prospectus all I can find is holders will be paid in cash. Given the volume traded in both the stock and options, seems impossible the vehicle would be disregarded. I could imagine it gets converted to ETF from the ETN structure. Does anyone with higher up connections than I, have any information???

    1000 Thank Yous!
  2. Edward

    Edward Well-Known Member

    VXX is an ETN.
    The ETN is a collective holding of VIX calls that averages out to an average expiration that expires in 30 days. Think of the collection of VIX calls roughly this way; every day a current month VIX call is sold and the next month VIX call is bought. So every day the average expiration is 30 days. VXX ETN do not expire.
  3. Srini

    Srini Active Member

    I would replace VIX calls with VIX futures. Every day they roll long position of first month with short position of second month.
  4. Srini

    Srini Active Member

    As you noted, it has enough interest in the product new debt obligation will be issued.
    It is very difficult to convert into ETF structure. For ETF structure to be created, there should be risk-less arbitrage between spot and ETN for creation and destruction of units. Here in this case VIX future is the underlying and this future has no tight relation with cash VIX or one can hold cash VIX. Think of SPY or GLD, where in fund can hold basket of stocks or spot gold and can create or destruct units easily, not so in the case of VXX.

    Edit: Since you mentioned 2019, I hope you are not using these vol. products as buy and hold vehicles. These are purely trading vehicles.
    Last edited: May 18, 2017
  5. Edward

    Edward Well-Known Member

    That's right, typos when you stay up too lateo_O. Was expecting some follow thru on yesterdays crash. Hope it has stop today.
  6. Srini

    Srini Active Member

    Trump trade is done. There was a good article in WSJ regarding the same, where they show Crude, Gold, USD, Peso and yield curve all reversed to the level before election except US stocks.
    Last edited: May 18, 2017
  7. BroncoCap

    BroncoCap Member

    UVXY and SVXY are ETF products so no reason why VXX cannot be one as well. Those products transact in the /VX futures market daily, just as VXX could do. They do issue K1s associated with holding rather than than 1099 but get futures tax benefits (60/40). I am very familiar with these products hence knowing that VXX does expire (ahem Edward...).

    As for 2019, that's just when it expires. I have a very interesting strategy wrapped around VXX options but don't want to get too ahead of myself if it's slated to disappear in 1.5 years with no replacement in sight. I have studied actually just using the futures but the options are not as nice as VXX (fees, strikes, floors, etc) and the account size required to do so is far larger than VXX.

    I'll await a hopeful answer from Jim, since his VolVantage Alert Service uses VXX, it would be unlikely he'd offer it without knowing what happens to VXX (or would be a bit overzealous doing so and should alert everyone as such).

  8. BroncoCap

    BroncoCap Member

    Sorry Edward, but wrong. The VXX ETN is slated to "mature" Jan 30th, 2019. See here: http://www.ipathetn.com/US/16/en//i...&dataType=html&searchTerm=vxx#/details/259118 specifically

    Inception Date
    29 January 2009
    30 January 2019

    It was a 10 year "note".

  9. Edward

    Edward Well-Known Member

    Interesting, I should mention if you want to direct your question to Jim Riggio you might have to email him directly. He doesn't read the Forum much. Otherwise contact Barclays.
  10. Srini

    Srini Active Member

    I stand corrected regarding Vol. ETFs. I thought investors / traders won't tolerate big tracking error induced by not having riskless arbitrage. I just checked premium/discount of ETF with NAV. 19 days out of 62 day premium/discount of more than 100 basis points over last qtr :p. Couple of days more than 250 basis points lol.
    I think there some saying fools and their money some thing something separating. I will stick with direct trading of VX futures and VIX calls
    Edit: I wanted to see how this ETF behaved during Brexit time.
    29 days out of 64 days over 100 bp tracking error. 3 days of more than 6% :eek:. Those tracking error per day is more than twice the yield of 30 year bond.
    It should come with warning, holding more than a single day is hazardous to your wealth.
    Last edited: May 19, 2017
  11. BroncoCap

    BroncoCap Member

    Thanks to you both.
  12. Capt Hobbes

    Capt Hobbes Well-Known Member

    From comments at https://sixfigureinvesting.com/2013/04/how-does-vxx-work/:

    "Thanks for this and many others interesting posts! Only a question, I see that on investing.com the name is "iPath S&P 500 VIX Short-Term Futures Exp 30 Jan 2019 (VXX)"... The expiration date "30 Jan 2019" what does it mean? Thanks in advance!"

    "Hi Giulio, I called Barclays regarding this. The person I talked to said that they can't just extend the date on VXX, so they will very likely create another ETN like VXX that has a farther out expiration date. I suspect they will figure out how to move the VXX ticker over to this new fund, but that might be an open issue."
  13. BroncoCap

    BroncoCap Member

    Thanks Capt!

    I figured that would be the case. In reality, as I continued searching, I found VIXY, an ETF duplicate of VXX with moderate stock volume and so-so options volume. Ideally, the market would transition to this product and remove the ETN from existence (removes counter party risk, etc). There are tax and income reporting issues with VIXY since it holds /VX futures with associated K-1s and 60/40 tax info and treatment. Net-net probably a wash if not slightly more work at tax time.

    At least I'll be able to transition and ride out the VXX reboot in VIXY as I use long dated, far OTM calls to define my risk and provide fat tail insurance against my near term, closer to the money short calls and ratios.


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