The Great Debate for a VIX ETF
September 11th at 2:00pm by Tom Lydon
As the markets and exchange traded funds (ETFs) continue to experience high volatility, many investors’ eyes are on the Market Volatility Index (VIX). The VIX has an inverse relationship with the performance of stocks and ETFs in that as they decline, the VIX rises. So many investors have been asking for an ETF that tracks the VIX as another way to benefit from a market decline.
While this might be nice in theory, Michael Bommarito for ETF Central says too many obstacles are in the way to develop a VIX ETF. For one, the VIX is not very liquid. For two, the VIX is designed as a theoretical price, not an asset like commodities and bonds that recently have been included in ETFs. However, analysts said commodity ETFs would never work either and yet, they’re here to stay. So, perhaps a VIX ETF will roll out eventually, but it more than likely would have a high expense ratio to compensate for its unstable structure. Do you think a VIX ETF is around the corner? If so, would you be interested?
