VXX Split

Split VXX Split

So when VXX ticked around 12.5 on Monday, I tweeted this.

@chicagosean hey, perfect time for that 1:4 reverse split, $VXX to 50!

And wouldn’t you know it, Barclays apparently follows me, because within 24 hours, we get this.
Barclays Bank PLC announced today that it will implement a 1 for 4 reverse split of its iPath® S&P 500 VIX Short-Term FuturesTM Exchange Traded Notes (the “Notes”) effective Tuesday, November 9, 2010.

…….The record date for the reverse split will be the close of business, New York time, on November 8, 2010. The closing indicative value of the Notes on the record date will be multiplied by four to determine the reverse-split adjusted value of the Notes. The reverse split will be effective at the open of trading on November 9, 2010 and the Notes will begin trading on the NYSE Arca and the TSX on a reverse-split adjusted basis on such date.

This should resolve all problems in VXX (not).  VXX is a mathematical concoction based on derivatives (VIX futures) that trade off a statistic (the VIX). It was just a number when they started trading it a 100, it was just a number at 12.5, and will become……..just a number at 50. A stock price is just a number too, but it bears a relationship to the cash the company generates, the earnings per share, et. al. VXX does not, the only “asset” is the VIX futures (or swaps) that it owns. And if it keeps losing money rolling those futures/swaps, its VIX Explosion or bust.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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