Why Traders are Selling VXX Calls

The VXX volatility exchange-traded note is not far off last week’s all-time low, and traders apparently believe that any upside would be limited.

The iPath S&P 500 VIX Short-Term Futures ETN is down 1.16 percent to $35.57 this morning after trading down to $33.12 on Friday, a new low. The note did undergo a reverse split last week, which takes the adjusted opening price up to 1600. It climbed to a high of 1920 in February 2009 but has seen a colossal collapse since.

Much of this drop in the VXX, as well as confusion about it, comes from its construction. The VXX doesn’t track the VIX but is composed of the two front-month VIX futures and has a daily roll from the first of those contracts to the second.

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