Goodbye VXXB, We Hardly Knew Ye

Effective May 2nd, VXXB and VXZB, Barclays’ short- and medium-term volatility funds will be renamed to VXX and VXZ.  This is a market maneuver by Barclays to recapture the brand value of the original, very successful, VXX and moderately successful VXZ products introduced in 2009.  The original products matured in January 2019 so Barclays had to create VXXB and VXZB as replacement products. However, there’s nothing to prevent tickers from being reused so Barclays acted after only three months to recapture the brand value of these retired tickers.

On May 2nd, 2019 the tickers will be renamed as well as all of their associated options.

While very similar, these products are not identical to the original VXX & VXZ products.  Specifically:

  1. An “Issuer Call” feature has been added which formalizes Barclays’ right to shutdown these funds at any time if they wish.  In this situation shareholders will receive cash in exchange for their shares using a formal termination value tied to the underlying VIX future prices.
  2. These funds will not be covered under the Option Clearing Corporation (OCC) Portfolio Margin program.  My understanding is that this is because of an agreement to not include any Exchange Traded Notes (ETNs) in the program that were created after a certain date. Presumably this is because of the perceived higher credit risk associated with ETNs. This portfolio margin program is of interest to institutional traders and retail traders wanting to use an integrated margin calculation for their accounts  

For more on these issues and the price history of the original VXX see Goodbye VXX, Hello VXXB

For details on how VXX and VXXB work see How Does VXX/VXXB Work

Six Figure Investing VXX simulation

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