#3- THIS WAS A COMPLETE SURPRISE, THAT NO ONE SAW COMING!!!
FALSE
The prospectus for all these products describe in bolded black and white the possibility and circumstances that could lead to the early termination of these products. Additionally, most custodians require investors to acknowledge this risk before allowing investors to trade them. In 2015 we wrote a piece on ETF.com describing the use of XIV as “picking up dollars in front of a steamroller”, so we urged consistent profit harvesting and proper position sizing.
#4- THIS HAPPENED AFTER MARKET HOURS!!!
PARTIALLY FALSE
The collapse in underlying value of these products did occur after 4 pm when ETF trading ended. That said, VIX Futures trade until 4:15, during that 15-minute window the Futures traded at extraordinary levels forcing the collapse. It is possible that a Hedge Fund facilitated the exacerbated pricing for profit. It’s our belief that in the end, it will be a hedge fund or some bank proprietary trading desk with the black eye. That said, these after-hours moves could happen with any asset (international stocks, commodities, currencies) that trade when US-listed ETFs are not trading.
LETS END WITH A TONGUE TWISTER
Despite the volatility and the volatility of volatility of volatility ETPs, we believe ETFs will continue to grow and TETFindex (Click here for more information on the ETF following this index) is the way to track that growth. And remember, volatility is normal; complacency is the anomaly.
This article was written by Toroso Asset Management, a participant in the ETF Strategist Channel.
FOR FINANCIAL PROFESSIONAL USE ONLY
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This document does not constitute an offer to sell or the solicitation of an offer to buy any security or investment product and should not be construed as such. Any investment strategy that follows theToroso Industry ETF Index (“TETF.Index”) may not be suitable for all types of clients. All investing involves risk including the possible loss of all amounts invested. Prospective clients should not rely solely on this information in making a decision, but should make an independent review of all available facts and information regarding investments following the TETF.Index, including the economic benefits and risks of pursuing any strategies mentioned. Any investment decision should be based on their individual circumstances. Registration with the SEC does not imply a certain level of skill or training.
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