Six new exchange traded notes (ETNs) have hit the scene, giving investors even more ways to make bets on the direction of the market’s “fear index.”
VelocityShares’ new line of ETNs is designed to allow investors to make calls on the moves of the Volatility Index, otherwise known as the VIX. The funds are:
- VelocityShares Daily Inverse VIX Short-Term ETN (NYSEArca:XIV)
- VelocityShares Daily Inverse VIX Medium-Term ETN(NYSEArca: ZIV)
- VelocityShares VIX Short-Term ETN(NYSEArca: VIIX)
- VelocityShares VIX Medium-Term ETN(NYSEArca: VIIZ)
- VelocityShares Daily 2x VIX Short-Term ETN(NYSEArca: TVIX)
- VelocityShares Daily 2x VIX Medium-Term ETN(NYSEArca: TVIZ)
The VIX is the market’s so-called “fear gauge,” which is calculated based on prices investors pay to buy and sell options on the S&P 500. The biggest risk with volatility-based ETNs is that because these securities’ returns reflect the cost of rolling futures contracts, long-term investors could see gradual losses, occasionally interrupted by sharp but temporary gains.
Credit Suisse is the issuer; like all ETNs, these offerings are backed by the full faith and credit of the issuing institution.
The provider cautions that these ETNs are intended to be for sophisticated investors in order for them to manage daily trading risks. [The ETN Industry Comeback.]
The VIX is becoming an increasingly popular subject of launches and filings. Earlier this month, ProShares filed to launch VIX ETFs. iPath has a suite of VIX ETNs, as well, that have proved to be a hit with investors.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.