The iPath S&P 500 VIX Short-Term Futures (VXX) is an exchange-traded note (ETN) designed to provide investors with exposure to equity ma☂rket volatility. Shares of an ETN, which is structured as a debt instrument, can be bought and s⛦old like shares of stock.

During times of high 澳洲幸运5官方开奖结果体彩网:volatility 🔯in the stock mar🤡ket, the value of VXX shares will typically increase. On the other hand, quiet periods for the market will likely keep shares trending lower. Here's why.

Understanding VXX

The iPath S&P 500 VIX Short-Term Futures ETN is legally structured as an exchange-traded note (ETN), which is similar in nature to an exchange-traded fund (ETF). 澳洲幸运5官方开奖结果体彩网:The main differen🉐ce between an ETF and a🅘n ETN is that, while the exchange-traded fund represents ownership in a basket of securities—stocks, bonds, or commodities—within the fund's portfolio, the exchange-traded note is an uncollateralized debt instrument and has bond-like characteristics: investors can hold shares until maturity (which is Jan. 23, 2048, for the VXX ETN launched Jan. 19, 2018) and buy and sell before maturity.

Managed by Barclays Capital Incorporated, the iPath S&P 500 VIX Short-Term Futures ETN is linked to the daily price changes in 澳洲幸运5官方开奖结果体彩网:Cboe Volatility Index, but in a complicated way. VIX is sometimes called the market's "fear gauge" because it tends to rise during periods of market uncertainty and spike in times of panic. The index tracks changes in the expected volatility priced into S&P 500 澳洲幸运5官方开奖结果体彩网:Index options and is computed using an options-pricing formula.

澳洲幸运5官方开奖结果体彩网:Futures contracts are listed on Cboe Volatility Index, and VXX is an ETN that tracks the S&P 500 VIX Short-Term Futures Total Return Index, which is designed to offer exposure to long positions in Cboe Volatility Index futures contracts. Therefore, VXX does not track VIX itself (spot VIX), but the futures on VIX, which often trade at very different price levels depending on the time to maturity.

Risks

Since VXX must roll its futures contracts to rebalance the fund to the later contract, the fund manager is forced to sell the futures contracts that are closest to their expiration dates and buy the next dated contracts, which is a process called rolling. Since longer-dated futures contra꧒cts are often at higher levels than shorter-dated ones (during normal market conditions), the rolling activity can result in losses (as the ETN is forced to sell the lower-valued contracts and buy the higher-priced contracts).

The iPath S&P 500 VIX Short-Term Futures ETN can be influenced by many unpredictable factors, and the price of VXX can fluctuate substantially between now and the maturity date. Influential factors include prevailing market prices of the U.S. stock market, S&P 500 Index options prices, supply and demand for VXX, as well☂ as economic, political, regulatory or judicial events, or changes to interest𝓡 rate policies. Basically, anything that affects stock prices can also affect volatility and VXX shares.

The Bottom Line

An investment in VXX might be suitable for investors who want to hedge their portfolios against a market downturn and speculators who have a high 澳洲幸运5官方开奖结果体彩网:risk tolerance. However, since the iPath S&P 500 VIX Short-Term Futures ETN is only composed of derivative contracts, individuals should understand the 澳洲幸运5官方开奖结果体彩网:Cboe Volatility Index a🦄nd VIX futures before investing or trading the exchange-traded note.