Barclays’ XXV —the first ETN with nowhere to go?


Updated: Mar 12th, 2017 | Vance Harwood | @6_Figure_Invest

Update.  Barclays’  responded to the problems noted below with their IVOP ETN.  It has now has a similar situation that XXV has—near its max price and very low leverage.    See this post for more information.

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Originally Posted December 11, 2011

Question: What would the value of Barclays’ inverse volatility XXV ETN be if Barclays’ volatility VXX ETN goes to zero?

Answer $40 / share

As this Volatility Futures and Options post makes clear, Barclay’s XXV doesn’t have much of a future.  Currently at $33,  it can’t go higher than $40,  a 21% increase from where it is now—regardless of how low VXX goes.   After a 50% rise in its first 3 months of existence, this little nova of a fund is doomed to spending the rest of its life in lethargy.

To me XIV, VelocityShares Daily Inverse VIX Short-Term ETN, which tracks the inverse daily returns of VXX, looks like a much better solution if you want to profit from VXX’s contango driven path towards zero.

The graph below shows how XXV has run its course, and how XIV is giving superior performance.

XXV vs XIV, click to enlarge

 

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Sunday, March 12th, 2017 | Vance Harwood