“The Chicago Board Options Exchange’s volatility index soared 31% after the credit-rating provider Standard & Poor’s downgraded the debt of both Portugal and Greece, assigning “junk” status to the latter. After closing Monday at 17.47, the volatility index, or VIX, popped to an intraday high of 23.2 before closing at 22.81, the highest close since Feb. 11 and the first time in eight weeks the index has moved above the psychologically important threshold of 20. The move reflected concerns about the stock market, as the Dow Jones Industrial Average sank 213 points, the fourth steepest decline of the year, to 10992,”  Tennille Tracy Reports From The WSJ.

“The VIX is moving higher because the percentage move in the [stock] market is considerably higher than what the average move in the VIX was reflecting it to be,” said Ben Londergan, co-chief executive of Group One Trading, which specializes in VIX options.

“The VIX historically traded in the teens. But it soared above 80 in late 2008 amid the uncertainty in the weeks after Lehman Brothers filed for bankruptcy. It has since drifted lower, reaching a multi-year low of 15.23 on April 12. In addition to the S&P’s downgrade, the VIX’s move was influenced by trading in CurrencyShares Euro Trust, an exchange-traded fund that tracks the price of the euro. As the euro weakened against the dollar and the yen, options traders pursued bearish positions in the fund, picking up 21,000 puts that allow them to sell its shares and only 2,000 calls that allow them to buy, according to Trade Alert. It was the second time in recent days that traders sought bearish positions in that fund. Last Thursday, traders adopted bearish “butterfly spreads” in the fund’s May options while conducting “put spreads” in the longer-dated January contracts,” Tracy Reports.

“It’s not like a switch just turned on [following the S&P downgrade of Portugal and Greece],” said Christopher Jacobson, senior options strategist with Susquehanna Financial Group. “This has been fairly consistent for a while now.”

The recent volatility in market has investors in the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) cheering with major gains.  But, Don Dion From The Street.com seems to think otherwise for the fund.  “Uncertainty surrounding Europe’s plans to bail out Greece make for a shaky day of trading. In response to the jittery markets, the fear-tracking VIX is scoring some nice gains. (NYSE: VXX) has been on a consistent downward slide throughout 2010. However, this has not stopped other firms from mulling the possibility of launching their own products. This week, Jefferies announced its plan to launch the first VIX-tracking ETF, the Jefferies S&P 500 VIX Short-Term Futures ETF, which will trade under the symbol, (NYSE: VIXX). I would advise investors to steer clear of any fund designed to track this index. These funds have further to fall as the world’s markets continue on the road to recovery,” Don Dion Reports.

Here is a link to our story with more details on the new Jefferies S&P 500 VIX Short-Term Futures ETF: Jefferies Files for Jefferies S&P 500 VIX Short-Term Futures ETF (VIXX)

We have put together some more details on the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) for you to look at below:

The S&P 500 VIX Short-Term Futures™ Index TR is designed to provide access to equity market volatility through CBOE Volatility Index® (the “VIX Index”) futures. Specifically, the S&P 500 VIX Short-Term Futures™ Index TR offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500® Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract.

A direct investment in VIX (commonly referred to as spot VIX) is not possible. The S&P 500 VIX Short-Term Futures™ Index TR holds VIX futures contracts, which could involve roll costs and exhibit different risk and return characteristics. Investments offering volatility exposure can have various uses within a portfolio including hedging, directional, or arbitrage strategies and are typically short or medium-term in nature.

See The Full Prospectus: HERE

ETF BASIC NEWS, VIXX, VXX