Balchunas on the Growing Popularity of VIX ETPs (VXX, CVOL, TVIX)

Bloomberg ETF analyst Eric  Balchunas discusses the growing popularity of exchange-traded  products that track the Chicago Board Options Exchange  Volatility Index.  The volume of one of them has jumped more  than any other U.S. ETF this year.  Bloomberg Radio’s Catherine  Cowdery reports on Exchange Traded Funds.

You can hear the full “Bloomberg” interview: HERE

Related:

iPath S&P 500 VIX Short Term Futures ETN (NYSEARCA:VXX)

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.

C Tracks Exchange Traded Notes Based on the Performance of the Citi Volatility Index Total Return Fund (NYSEARCA:CVOL)

The C-Tracks Exchange-Traded Notes (the “C-Tracks”) linked to the Citi Volatility Index Total Return (the “Index”) provide investors with an investable means to gain directional exposure to the implied volatility of large-cap U.S. stocks.   The Index methodology combines a daily rolling long exposure to the third- and fourth-month futures contracts on the CBOE Volatility Index (the “VIX Index”) with a short exposure to the S&P 500 Total Return Index. The VIX futures contracts exposure is constantly maintained, but the weighting of the S&P 500 Total Return Index is variable and determined monthly via a backward-looking linear regression.   As a total return index, the value of the Index on any day also includes daily accrued interest on the hypothetical notional value of the Index based on the 3-month U.S. treasury rate and reinvestment into the Index.   The Index methodology is designed to produce daily returns more correlated to the VIX Index than a portfolio of VIX futures contracts and with a similar magnitude to the daily returns of the VIX Index.   There can be no assurance, however, that the Index will produce the best correlation to the VIX Index or a similar magnitude to the returns of the VIX Index.

VelocityShares Daily 2x VIX Short Term ETN (NYSEARCA:TVIX)

The VelocityShares Daily 2x VIX Short-Term ETNs (the “ETNs”) are senior, unsecured obligations of Credit Suisse AG (“Credit Suisse”) acting through its Nassau branch. The return on the ETNs is linked to twice (2x) the daily performance of the S&P 500 VIX Short-Term Futures™ Index ER less the investor fee. The ETNs provide traders with an exchange traded instrument enabling them to efficiently express their market views on the short-term futures contracts on the CBOE SPX Volatility Index® (the “VIX®”). The ETNs do not guarantee any return of principal at maturity and do not pay any interest during their term.

The index was designed to provide investors with exposure to one or more maturities of futures contracts on the VIX®, which reflects implied volatility of the S&P 500® Index at various points along the volatility forward curve. The calculation of the VIX® is based on prices of put and call options on the S&P 500® Index. The S&P 500 VIX Short-Term Futures™ Index ER targets a constant weighted average maturity of 1 month. The ETNs are linked to a multiple (2x) of the daily return of the index and do not represent an investment in the VIX®.

 

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