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Short VIX Funds See Huge Gains, And Huge Profit-Taking Too

Wednesday, February 22, 2017 10:19
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We have spoken about the VIX quite a bit in the past several weeks, especially since it had a $10 handle briefly in mid-February, only to surge back to its 50 day MA today and challenge a $12 handle once again.

A Volatility linked fund that benefits when VIX futures fall is SVXY (ProShares Short VIX Short-Term Futures ETF), and the fund has seen some position trimming and profit-taking into the recent move higher in VIX futures and the VIX Index itself.

SVXY has seen substantial outflows, considering the size of its overall asset base in recent sessions, with approximately $135 million leaving the fund ($228 million is the current AUM). Since VIX futures tend to be perpetually in contango, at least historically, Inverse “VIX Futures” products have benefited from these conditions for months on end, and it is not terribly surprising to see some profit-taking and position lightening, given a VIX itself that recently registered a $10 handle (especially when it has moved sharply higher in short order lately, even with global equities mostly hitting new highs).

SVXY is the second largest “Inverse Volatility” ETP in the U.S. listed landscape, behind the more tenured XIV (VelocityShares Daily Inverse VIX Short-Term Futures ETN, Expense Ratio 1.35%, $565 million in AUM). XIV has also seen substantial outflows year-to-date, with more than $225 million exiting the fund during this time frame.

Both XIV and SVXY have sported year-to-date returns in excess of 40%, so again, some position trimming is not at all surprising to us. Other “Inverse” VIX Futures based products that are much lesser known to portfolio managers and investors thanks to much lower AUM and average trading volume levels are ZIV (VelocityShares Daily Inverse VIX Medium-Term ETN, Expense Ratio 1.35%), VMIN (REX VolMAXX Inverse Weekly Futures Strategy ETF, Expense Ratio 1.45%), IVOP (iPath Inverse S&P 500 VIX Short-Term Futures ETN, Expense Ratio 0.89%), and XXV (iPath Inverse S&P 500 VIX Short-Term Futures ETN, Expense Ratio 0.89%).


The ProShares Short VIX Short-Term Futures ETF (NYSE:SVXY) was trading at $125.22 per share on Wednesday morning, down $2.26 (-1.77%). Year-to-date, SVXY has gained 37.63%, versus a 5.65% rise in the benchmark S&P 500 index during the same period.

SVXY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 5 ETFs in the Inverse Volatility ETFs category.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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