Funds Bet Against Volatility While VIX Notes Plummet 94%
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Investors have poured about $265 million over the past year into exchange-traded notes that rise as stock-market volatility declines, looking for profits where others have lost.
Accuvest Global Advisors and Armstrong Investment Managers LLP are two buyers using the exchange-traded notes, or ETNs, to bet against futures linked to the Chicago Board Options Exchange Volatility Index. The bet seeks to make money from the contracts’ tendency to decline in value over time, a phenomenon that causes losses for volatility speculators. Barclays Plc’s VXX note, which gains when the futures rise, has lost 94 percent of its value since it started trading in 2009.