Volatility Jump Has Traders Asking About VIX Note Poison Pill

Futures indicate 80% drop that could trigger liquidation
VIX front-month future surged more than 100% on Monday

Bloomberg’s Cameron Crise discusses the VIX and the Dow’s biggest two-day decline since May.(Source: Bloomberg)

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By Sarah Ponczek and Luke Kawa

February 6, 2018 at 12:20 AM UTC

Updated on

February 6, 2018 at 10:01 AM UTC

This article is for subscribers only.

The Cboe Volatility Index’s biggest rally ever is raising thorny questions about the future of exchange-traded products tied to the gauge.

An ETP meant to mirror moves in the front of the VIX’s futures curve plunged more than 75 percent in after-hours trading following an 80 percent spike in contracts that comprise its underlying index during the trading day, potentially putting in play triggers that would enable the fund’s owners to liquidate it to avoid losses.