A Closer Look At A Little-Known VIX ETF

We speak about volatility in the VIX itself in our ETF/Options and fund flows recap, and the ripple effects felt with Volatility based ETP VXX (iPath S&P 500 VIX Short-Term Futures ETN, Expense Ratio 0.89%, $1 billion in AUM).

The VXX has seen some very near term put buying (April 17.50 strikes), and this leads us into a conversation about a newer and relatively unknown “Volatility” offering.

VMAX (REX VolMAXX Long VIX Weekly Futures Strategy ETF, Expense Ratio 1.25%) debuted in May 2016, so it has not even had a year in the books yet in terms of live performance, but for what it is worth we note that it is down substantially “less” than VXX, the largest Volatility linked ETP in the marketplace during this time-frame. Furthermore, VMAX is structured as an ETF as opposed to VXX being an ETN, which may also be appealing to some investors whom will not use ETNs for various reasons.

However, VMAX is currently trading with a five dollar handle and has a 52-week high of $29.75 to put this all in perspective, and like any “Long VIX Futures” products it has been punished largely in the trailing one-year period and particularly since Trump’s election. The fund is very small at only $2.1 million in assets under management, which appears to be seed capital but in a relative sense, the recent volatility in the VIX itself has caused an uptick in trading volume in the product, causing its trailing one-month average daily trading volume to spike above 20,000 shares from its trailing three-month average of about 16,500 shares.

Notably, VMAX has also crossed above its 50 day MA for the first time since last November in recent sessions, but is currently struggling with this level today on a sink back to last week’s levels in the product. For those struggling to wrap their arms around on how VMAX’s investment methodology works and how it differs from say front month futures oriented VXX, fund literature offers the following:

“Provides long exposure to the VIX Index by holding combination of VIX futures contracts that are near to expiration. The Fund does not seek to track the performance of the VIX Index of the S&P 500 and can be expected to perform very differently from the VIX Index over all periods of time,” and further states “The Fund targets a weighted average of time to expiry of the VIX Futures Contracts that is less than one month at all times.”

Of course, as with many funds that are newer to the marketplace, portfolio managers, analysts, and fund ratings services such as Morningstar for example are likely waiting for live performance over longer periods of time to register before making the ultimate investment leap into the strategy.

The REX VolMAXX Long VIX Weekly Futures Strategy ETF (BATS:VMAX) was trading at $5.05 per share on Wednesday afternoon, down $0.20 (-3.81%). Year-to-date, VMAX has declined -40.38%, versus a 4.79% rise in the benchmark S&P 500 index during the same period.

VMAX currently has an ETF Daily News SMART Grade of D (Sell), and is ranked #6 of 11 ETFs in the Volatility ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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