iPath S&P 500 VIX Short Term Futures ETN (NYSEARCA: VXX)
Barclays plc (NYSE: BCS) launched IPath S&P 500 VIX banknotes in 2009. ETN seeks to provide investors with exposure to the S&P 500 VIX index in short-term futures contracts. This index consists of a day traded buy position in VIX 1 and 2 month futures to reflect the implied volatility of the S&P 500 Index. The average daily volume of the VXX is $ 1.16 billion, providing ample liquidity for traders who wish to use this tool to hedge their equity positions . Barclay Trust supports ETN.
The iPath S&P 500 VIX Short-Term Futures ETN is one of the largest volatile ETN companies, with Assets Under Management (AUM) of $ 821.43 million. Its expense ratio is 0.89% compared to the class average of 1.34%. Year-to-date (YTD), VXX is back 14.94% as of June 2018. (See also: VXX: ETN Performance Case Study.)
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ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA: UVXY)
Founded in 2011, the ProShares Ultra VIX Short Term Futures Fund (ETF) tries to match one and a half times (1.5x) the daily performance of the S&P 500 VIX short-term futures contract. Like the VXX, this ETF is a pure game fluctuation ETF that provides exposure to VIX 1 and 2 month futures; It differs by offering leveraged returns.
The ProShares Ultra VIX short-term futures fund has $ 471.36 million in net assets. The higher spending ratio of 1.65% makes it more suitable for short-term traders who are expecting a sudden surge in volatility. As of June 2018, UVXY is trading at $ 10.05 and has a 52-week trading range between $ 9.98 and $ 47.16. (For more information, see: Top 4 Reverse Volatility ETFs.)
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Nationwide ETF for Risk-Based US Equities (NYSEARCA: RBUS)
The risk-based US equity ETF, which was created in 2017, aims to provide returns similar to the risk-based US equity index. The benchmark index is an equal risk-weighted index that provides exposure to large-cap companies with less volatility and minimizes maximum drawdown. It attempts to maximize risk-adjusted returns compared to the traditional market value weighted approach. The most significant holdings in the ETF's portfolio, which consists of 249 stocks, includes Dr Pepper Snapple Inc. (NYSE: DPS), NXP Semiconductors NV (NASDAQ: NXPI) and the utility company The Southern Company (NYSE: SO).
The nationwide risk-based US equity ETF has a value of $ 118.56 million in net assets and charges investors an annual fee of 0.3%. As of June 2018, RBUS has a return to date of 0.15%, but has returned 2.42% over the past month.
Invesco S&P 500 Downside Hedged ETF (NYSEARCA: PHDG)
The Invesco S&P 500 Downside Hedged ETF, formed in 2012, is trying to provide investors with positive returns in both rising and falling markets. It is trying to achieve this by investing its asset base of $ 25.72 million in the stocks that make up the S&P 500 and by purchasing VIX futures contracts to hedge the portfolio. The top 10 stocks in the ETF portfolio have a cumulative weight of 23.68% and include names like Apple Inc. (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Exxon Mobil Corporation (NYSE: XOM).
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The downside to Invesco S&P 500 hedge expense ratio is 0.39%, which is very reasonable considering hedging constructions. It also pays out 1.98% dividend. The fund achieved returns of 3.62% over the past five years and 4.34% over the previous three years. It is back 5.05% year-to-date through June 2018
Since the Great Recession, the stock market has enjoyed a prolonged period of low volatility as one of the longest rallyes in history, buoyed by quantitative easing programs and corporate buybacks, driving up stock prices dramatically.
This long period of low volatility came to an abrupt end in the first quarter of 2018 as investors began to worry about higher interest rates after a particularly optimistic jobs report in January. On February 5, 2018, the S&P 500 Index fell more than 4%, pushing the Chicago Options Exchange (CBOE) Volatility Index (VIX) above 50 for a daily gain of 115%. (See also: February's stock market volatility didn't hurt ETFs.)
Other drivers for increased volatility in the second half of 2018 include elections in leading emerging markets such as Turkey, Mexico, and Brazil as well as midterm elections in the United States. Additionally, the trade wars looming between the United States and many of its closest allies have the potential to irritate investors. (For more information, see: 6 High Risk Stocks in a Trade War.)
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Volatility may also raise its head during the earnings seasons in July and October during the corporate buyback blackout - the time when companies are prohibited from repurchasing their shares in the lead up to the release of the quarterly results. This effectively reduces a large source of liquidity from the market that can make stock prices erratic.