Entering text into the input field will update the search result below

VIIX: The Trend Remains Downwards

QuandaryFX profile picture


  • VIIX has continued its drop as the S&P 500 recovers following the sell-off earlier this year.
  • Roll yield remains a predominant factor in explaining the returns of VIIX and investors need to pay attention to this figure.
  • Both trend and level analysis of the VIX suggest that the index is headed lower in the immediate future.

As you can see in the following chart, the past few weeks have not been favorable for long traders in the VelocityShares VIX Short-Term ETN (VIIX) with shares continuing to decline after the surge early this year.

While investors may be tempted to view the recent selloff as a buying opportunity, it is my opinion that any gains are likely to be only short term and that in the coming months we will continue to see VIIX head lower.

Understanding VIIX

Let's start this article off with a look under the hood at the mechanics of this ETN. Put simply, VIIX follows the S&P 500 Short-Term VIX Futures Index which is a methodology provided by S&P Global. The following chart shows the last 10 years of return for this methodology. VIIX is an ETN which tracks this strategy in lockstep so this effectively is equivalent to the return shareholders would have made had investors held the note during this time period (granted, this is impossible due to the listing date of the note).

As you can see, this index has shredded value for long traders to the annualized tune of about half per year. If you parked $100 in this index 10 years ago, you'd only have some change left now. If you are considering purchasing VIIX, think carefully about this: over the past year, there have only been a few one-year periods in which you would have earned a profit. For the most part, quarter after quarter of consistent losses are the norm for holders of this note.

The reason here is pretty simple: roll yield. I've covered this in depth before so I'll make it brief in this piece. But the basic problem is that VIX futures are generally priced above the spot level of the VIX (and tend to increase in

This article was written by

QuandaryFX profile picture
I work within the trading and money management industry. I have been trading and investing for several years. My style is technical execution with a fundamental thesis in place. I rely heavily on statistical analysis of the correlations between fundamental changes and price movements for generating most ideas.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (2)

jkevin2010 profile picture
Excellent analysis as always!
Be careful. The July/Aug spread is still backward (-0.11 as I write tonight) and stubbornly refuses to flip. Seems like bets are heavy for a summer pause.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.