With VXX and VIX at a low, hedgers and speculators alike are both long VXX products

VXX shares outstanding sharply rising without short position rising indicate huge net buying.

VXX is an ETF composed of VIX futures contracts and cash reserves, designed to track short-term volatility exposure. The VIX is a complex product, and VXX is even more intricate, as its underlying futures contracts must be rolled monthly—making returns highly dependent on the shape and slope of the VIX futures term structure.

That said, investors use VXX to trade implied volatility via the VIX, despite its imperfect correlation to spot VIX levels. The VIX tracks implied volatility—not realized volatility—although the two tend to move in tandem during major market events. With the VIX currently at 15, downside appears limited, while upside potential remains significant - especially given its ability to spike above 50 during high-stress periods.

Recently, VXX’s shares outstanding surged from 7 million to 28 million - a fourfold increase, indicating heightened investor demand. In ETFs, shares outstanding rise when investors are net buyers, prompting authorized participants to create new shares to meet demand.

Short interest in VXX shares has remained relatively stable, despite the dramatic increase in total float. Short interest as a percentage of float has declined, primarily due to the sharp increase in shares outstanding. When short interest remains constant while shares outstanding rise, the shift typically reflects growing long interest and increased speculative positioning.

With VXX trading near its lows, investors are buying in anticipation that rising realized volatility will spill over into implied volatility—boosting VXX’s value. Buyers may include speculators positioning for increased volatility, or hedgers seeking downside protection for broader equity portfolios.

Other products showing similar increases in shares outstanding include VIXY, and leveraged long volatility ETFs like UVXY (1.5x exposure) and UVIX (2x exposure)—all exhibiting the same investor behavior. Meanwhile, inverse volatility products such as SVXY (-0.5x) and SVIX (-1x) have seen net outflows and a reduction in shares outstanding. Investors are deploying VXX and its leveraged long/short counterparts to express tactical views on volatility, market risk, and potential tail events.

The table shows the shares outstanding now and in June, and difference and multiply that by the price to get the notional, then multiply by the leverage factor of the ETF.

The table reflects a $3.6 billion VIX-equivalent notional exposure, implying that a 1-point move in the VIX corresponds to a 6% gain—or approximately $210 million per volatility point.

Want to know more? Access this data in real time using S3’s BLACK APP & BLACK MAP

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.