Barclay’s Suspended VXX ETN Share Creation – Implications and Trades?

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by dreadnought89

Yesterday Barclay’s announced that they are suspending any further sales from inventory/issuance of VXX shares. This is the ETN that holds the front two months of /VX VIX futures contracts. Since the announcement, VXX has become decoupled from the VX futures prices, and is trading at a massive premium over NAV.

VXX implied volatility also spiked to >200%, as there is anticipation of a short squeeze. However, there is some historical precedence of this occurring to TVIX and once share issuance was resumed the price cratered.

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Anyone considering trading this ticker? Lots of premium on the table to sell calls; however, if they go ITM I don’t know what share availability will be to short VXX. There also seems like there is an arbitrage opportunity here, by going long the front month(s) VX futures contracts and shorting VXX. Again if a squeeze occurs and the share HTB rate skyrockets or becomes not available to borrow, that could be problematic.

Would love to hear others thoughts on this situation.

Update: VXX trading halted multiple times on circuit breaker.

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