AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights:
Overview of ETFs tracking the VIX volatility index.
Details on key funds like VXX, UVXY, and TVIX.
Information on ETF structures and index methodologies.
The volatility sector features exchange-traded funds (ETFs) designed to track the CBOE Volatility Index (VIX), a widely referenced gauge of expected market fluctuations on the S&P 500. Among these, the iPath Series B S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) tracks short-term VIX futures, providing exposure to the VIX Index through a futures-based approach. These ETFs generally trade on major exchanges such as the NYSE and NASDAQ and are linked to volatility indices based on the CBOE VIX futures.
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)
The iPath VXX is structured to reflect the returns of a rolling position in the first and second-month VIX futures contracts. It serves as a benchmark for volatility expectations implied by the options market. Due to its futures-based strategy, the fund experiences daily rebalancing to maintain exposure. VXX provides investors with a tool to access short-term market volatility through an exchange-traded note format.
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ProShares UVXY also tracks the short-term VIX futures index but uses leverage to provide a multiple of the daily performance of the underlying index. This fund focuses on providing magnified exposure to near-term volatility. Leverage and daily reset features result in a structure designed for short holding periods and heightened sensitivity to market movements reflected by the VIX futures curve.
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
TVIX offers leveraged exposure to short-term VIX futures by aiming to deliver twice the daily return of the underlying index. It is structured as an exchange-traded note, utilizing futures contracts on the CBOE VIX. TVIX is designed for active engagement with volatility, with exposure recalibrated daily to maintain the leverage target.
Other Volatility-Linked ETFs
Additional funds such as the ProShares VIX Short-Term Futures ETF (VIXY) track the same short-term VIX futures index but without leverage. The strategy focuses on maintaining consistent exposure to near-term VIX futures by rolling contracts daily to minimize tracking error. These ETFs provide alternatives with differing risk profiles and expense ratios within the volatility space.
ETF Structures and Index Methodologies
Volatility ETFs and ETNs rely heavily on futures contracts to mimic the behavior of the VIX, as direct investment in the VIX itself is not possible. These instruments utilize methodologies involving rolling futures positions to manage exposure over time. The choice between ETFs and ETNs affects factors such as credit, tax treatment, and fee structures. Understanding the underlying index construction and rolling mechanisms is essential for grasping the characteristics of these volatility products.
