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The most popular way to play volatility is going to its grave this week, but the impending death of an exchange-traded note sold by Barclays is not the end of the story for futures traders.
The iPath S&P 500 VIX Short-Term Futures ETN (VXX) will mature as scheduled on Jan. 30, ending a favored means to bet on a gauge of expected gyrations in the S&P 500. Anyone still owning the note at maturity will receive a cash payment based on its indicative value at the previous session’s close.
It’s a mixed legacy — due to a structural quirk, the note lost 99% of its value over its life — but it also democratized investor access to implied U.S. equity volatility. And there exists the potential, however slight at this point, for the wind-down to create one last wave in the futures market, if Barclays is forced to liquidate its hedge for the almost $500 million still invested in the note by 4 p.m. today.
The bank is replacing VXX with VXXB, a note identical in almost everything but ticker and maturity...