ETF Spotlight: A S&P 500 Volatility Hedge | ETF Trends

ETF Spotlight on the Direxion S&P 500 Volatility Response Shares (NYSEArca: VSPY), part of an ongoing series.

Assets: $36.7 million

Objective: The Direxion S&P 500 Volatility Response Shares tries to reflect the performance of the S&P 500 Volatility Response Index, which adjusts its composition of S&P 500 stocks and T-Bills in response to volatility in the S&P 500 index.

Holdings: Top holdings include Apple (NasdaqGS: AAPL) 3.4%, Exxon Mobil (NYSE: XOM) 2.3%, Microsoft (NasdaqGS: MSFT) 2.2%, Johnson & Johnson (NYSE: JNJ) 1.7% and General Electric (NYSE: GE) 1.5%.

What You Should Know:

  • Direxion Investments sponsors the fund.
  • VSPY has a 0.45% net expense ratio.
  • The ETF has 502 holdings, and the top ten components make up 17.8% of the overall portfolio.
  • Sector allocations include basic materials 3.3%, consumer discretionary 10.2%, financials 15.0%, real estate 1.9%, telecom services 4.0%, energy 9.7%, industrials 11.0%, tech 18.0%, consumer staples 9.5%, healthcare 14.3% and utilities 3.0%.
  • The fund is down 5.4% over the past month, down 4.6% over the last three months and up 2.7% year-to-date.
  • VSPY is designed to respond to the volatility levels of the underlying indices by adjusting its exposure to equities and U.S. Treasury Bills based on market volatility.
  • “The strategy follows a quantitative rules-based equity index that seeks to mitigate risk by dynamically changing total equity exposure based on volatility signals,” according to Direxion.
  • As long as the S&P 500 Index Volatility level is below 15%, the underlying index will hold a 100% exposure to stocks.
  • However, if the the S&P 500 Index Volatility level reaches 25% or above, the underlying index begins shifting over into the T-Bill, cash component.

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