VMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years
REX Shares is launching two new VIX
exchange-traded products on Tuesday in what is likely to be the most important
VIX ETP launch in several years. The REX
VolMAXX Long VIX Weekly Futures Strategy ETF (VMAX) is the long
volatility product, while the REX VolMAXX Inverse VIX Weekly Futures Strategy
ETF (VMIN) is the
short volatility sibling.
The launch of
these two products comes at a time when the VIX ETP space had become stale and
had frustrated investors who have sought out products for both long and short
volatility strategies when Every
Single VIX ETP (Long and Short) Lost Money in 2015.
After a flurry
of innovation in the VIX ETP space from 2009 to 2011, new product offerings
have slowed to a trickle over the course of the past few years, with only the
mystifying AccuShares VXUP and VXDN products making
it out of the gate last year in a highly-anticipated May 18th
launch that pivoted quickly from excitement to befuddlement, as investors were
overwhelmed by the complexities associated with the seemingly endless flow of regular
distributions, special distributions and corrective distributions.
VIX aficionados
know that 2015 was also notable in that it marked the launch by the CBOE of VIX
weekly futures on July 23rd and VIX
weekly options on October 8th. Both product launches were successful and it
was just a matter of time before the new VIX weekly futures provided the foundation
for a VIX ETP that was based on those futures. While details are sketchy regarding VMAX and
VMIN, they will be holding VIX weekly futures and will target a
weighted-average VIX futures maturity that is less than thirty days. These ETFs will be actively managed and it is
likely that they will not have a fixed target maturity. Theoretically, the target maturity could vary
anywhere from five days to 29 days, though given the holdings and the “max” and
“min” embedded in the ticker symbol, I would anticipate an aggressive target
maturity on the order of 7-14 calendar days.
Whatever the
target maturity, VMAX will be competing with VXX right from the
outset, while VMIN will find itself up against the likes of XIV. The competition trades approximately 100
million shares each day and is certainly vulnerable to new products that have a
higher beta and should more closely track the spot/cash VIX on a daily basis. Depending upon the target maturity of VMAX
and VMIN, I would not be surprised if these products have 50% more beta than
VXX and XIV. For this reason, I would be
shocked if, at the very minimum, VMAX and VMIN do not become darlings of the
day-trading crowd – a forecast not unlike the one I made on November 14, 2008
in Prediction:
Direxion Triple ETFs Will Revolutionize Day Trading.
Frankly, this
space has been relatively inactive as of late and with VMAX and VMIN, I now
have the perfect opportunity to dust off the cobwebs and spit out the analysis
and opinions that once came in such machine-gun rapidity that readers
came up some far-reaching possible explanations for why I was so prolific.
So…consider me
back. I’m rested, hungry and ready for
some new – and old – subjects to tackle.
I’ve even
managed to dig deep into the archives so that readers can easily
refer to some of my musings on issues related to the above subjects.
Related posts:
- 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
- Last Two Days Are #5 and #6 One-Day VIX Spikes in History
- Prediction: Direxion Triple ETFs Will Revolutionize Day Trading
- The 1000th Post
Disclosure(s): net short VXX and net long XIV at time of writing; CBOE is an advertiser on VIX and More
