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Consider This Alternative as Volatility ETFs Hit All-Time Lows Once Again

Monday, October 24, 2016 9:57
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VIXWith several volatility based ETPs hitting new all-time lows once again today, our attention turns to some lesser-known products in the space.

Even though the VIX itself is not trading at all-time lows, but rather is up substantially even at present levels from its low $11’s registered in August, trouble continues for the largest “Volatility” based ETPs such as VXX (iPath S&P 500 VIX Short-Term Futures ETN, Expense Ratio 0.89%, $1.3 billion in AUM), UVXY (ProShares Ultra VIX Short-Term Futures ETF, Expense Ratio 0.95%, $663 million in AUM), and VIXY (ProShares VIX Short-Term Futures ETF, Expense Ratio 0.85%, $221 million in AUM).

Today we look beyond these front month Short-Term Futures oriented products at a little known $23.9 million ETN from VelocityShares known as BSWN (VIX Tail Risk ETN, Expense Ratio 1.30%) which debuted in July of this year.

When we look at the fund prospectus for BSWN we see that the index is “designed to provide exposure to a different dynamic short-term volatility strategy by pairing both leveraged long and unleveraged short positions in first and second month VIX futures contracts. Each Index has a target allocation between long and short exposures to VIX futures contracts as described herein. Each Index measures the performance of 13 separate sub-portfolios that are rebalanced quarterly on a rolling basis, and the leveraged long and unleveraged short positions within each sub-portfolio are rebalanced daily.”

The strategy is predicated on both “Variable Long/Short Securities” as well as “Tail Risk Securities,” which are detailed on page 1 to some degree, noting that this is a 182-page prospectus for this ETN.

BSWN is one of several non-mainstream, non “Long front month-short term VIX futures” ETPs in the U.S. listed landscape that may or may not be appropriate for investors depending on their specific portfolio needs and levels of sophistication.


BSWN shares were unchanged at $23.95 in Monday afternoon trading. Since its debut in July, BWSN has fallen 4.39%.

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