Updated VIX ETP Landscape, Including VMAX and VMIN
Now that the
recently launched REX VolMAXX Long VIX Weekly Futures Strategy ETF (VMAX) and REX
VolMAXX Inverse VIX Weekly Futures Strategy ETF (VMIN) VIX
exchange-traded products have started to achieve critical mass, I thought
it would be a good time to update my VIX ETP landscape chart.
In the graphic
below, I have plotted all of the VIX ETPs with respect to their target maturity
(X-axis) and leverage (Y-axis).
[source(s): VIX and More]
The most
interesting change in this chart is the addition of VMAX and VMIN, which are on
track to trade over 100,000 as a pair today for the first time since their
launch two weeks ago. In deciding
where to plot these two issues, I note that the 10-day historical volatility of
VMAX and VMIN is approximately 30% higher than their more popular competitors, VXX and XIV. As VMAX and VMIN are actively managed and do
not have a fixed target maturity, I am electing to assume that based on the
early history, the target maturity is in the 2-3 week range. Additionally, while there is no leverage being
used in the traditional sense, as is the case with UVXY, TVIX and TVIZ, so far the
use of VIX
weekly futures in addition to the standard monthly VIX futures
means that VMAX and VMIN have a higher beta than VXX and XIV. For this reason, I have also plotted VMAX and
VMIN as having slightly higher "leverage" than the group of VIX ETPs that have a
target maturity of thirty days, such as VXX, XIV, etc.
Frankly, I am a
little surprised that VMAX and VMIN have not attracted more interest in the
trading community, as these products have features that should be very
attractive to short-term traders. For
now, the bid ask-spreads are typically in the 0.05 – 0.10 range, but as these
tighten up, I expect volume and trading interest will ramp up quickly.
One necrology
housekeeping note of interest: Citibank
has decided to redeem early its C-Tracks Exchange-Traded Notes Based on the
Citi Volatility Index Total Return (CVOL). The last day of trading for CVOL will be May
23, 2016, with cash payments to be made to investors on May 24, 2016. The diagonal “X” through the ticker symbol in the chart indicates that this is the last time CVOL will appear on this graphic.
Finally, when
one is trading VIX ETPs, it is always essential to consider the degree of contango (or backwardation)
in the VIX futures, which can translate into substantial negative roll yield. For the record, the current month is on track
to have the third largest average negative roll yield for the month in the
thirteen-year history of the VIX futures.
For those who may be interested, the top two months in terms of extreme
negative roll yield were March 2012 and July 2004.
Related posts:
- VMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years
- Every Single VIX ETP (Long and Short) Lost Money in 2015
- Will TVIX Go To Zero?
- Four Key Drivers of the Price of TVIX
- All About UVXY
- Charting the Assets of the Volatility-Based ETPs
- Why VXX Is Not a Good Short-Term or Long-Term Play
- VXX Calculations, VIX Futures and Time Decay
- Disappointment Lurks as Volume Surges in VXX
- Who Trades the VIX and VXX?
- First Day of Trading in VXX and VXZ a Success
- CVOL Steps It Up
- Interesting New Leveraged Volatility ETN Coming from Citi
Disclosure(s): net short VXX, VMAX, UVXY, TVIX and TVIZ; net
long XIV, VMIN and ZIV at time of writing
[source(s): VIX and More]
