VZZ Terminates and VZZB Fills the Void

As mentioned in ETF Stats for June 2011, the iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETN (VZZ) hit an early termination trigger on July 1 by trading below $10.  The press release indicated VZZ would be redeemed on July 11, 2011, but it did not indicate the delisting date.  Subsequent to the July 1 press release, Barclays indicated the last day of trading for VZZ would be 7/8/11.

Last Monday (7/11/11), Barclays introduced a replacement for VZZ by tacking “II” to its name and “B” to its ticker symbol, producing the iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETNs II (VZZB).

Like VZZ, VZZB is a “no-reset” leveraged product.  As such, early termination trigger mechanisms are required to prevent a total loss (or worse) of the investment.  I predicted that VZZ had a very high probability of early termination at the time of  launch.  However, I thought it would take longer seven months. 

VZZB appears to be identical to VZZ with the exception that its initial 200% participation level is based on a lower VIX level.  Still, VZZB also has a high probability of triggering an early termination event prior to the end of its schedule 10-year life span.

Additional information on the “new” VZZB can be found in the overview, fact sheet (pdf), prospectus (pdf), and the Basics of iPath Leveraged ETNs (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Comments

One Response to “VZZ Terminates and VZZB Fills the Void”

  1. Nine New ETPs for Week Ending 7/15/11 | Invest With An Edge on July 17th, 2011 7:13 pm

    [...] (VZZB) provides an initial 200% exposure (without any leverage reset) to mid-term VIX futures.  VZZB is a replacement for VZZ, which triggered an early termination on July 1, [...]

Free Special Report

With interest rates near zero, how can you generate income with your nest egg? Our free special report shows you how. cover art
You will also receive our weekly market commentary and unique analysis based on our Edge Charts. Privacy

The Market Today

Subscribe to Commentary

Sign up HERE to get breaking news from Invest With An Edge & other updates.