What are Volatility Shares ETFs?

Volatility Shares ETFs are exchange-traded funds that aim to provide exposure to volatility or volatility-related strategies. These ETFs are designed to track the performance of volatility indexes or employ strategies that profit from market volatility.

How do Volatility Shares ETFs work?

Volatility Shares ETFs utilize various methods to track volatility, such as investing in futures contracts, options, or volatility derivatives. These ETFs aim to provide returns that correspond to the performance of the underlying volatility index or strategy.

What are the advantages of investing in Volatility Shares ETFs?

Investing in Volatility Shares ETFs can offer portfolio diversification, as volatility is often negatively correlated with traditional equity markets. These ETFs can serve as hedging tools during periods of market uncertainty and potentially provide opportunities for profit during volatile market conditions.

What factors should I consider when choosing Volatility Shares ETFs?

When selecting Volatility Shares ETFs, consider factors such as the underlying index or strategy, expense ratios, liquidity, trading volume, and the ETF provider's reputation. It's important to understand the specific approach and risks associated with each ETF.

Can you provide examples of reputable Volatility Shares ETF providers?

Some reputable providers of Volatility Shares ETFs include ProShares, VelocityShares, iPath, and WisdomTree. These providers offer a range of volatility-focused ETFs that cater to different investment objectives and strategies.

What are the best Volatility Shares ETFs?

5 min read

By Ron Koren, ETF Insider

What are the best Volatility Shares ETFs?

Volatility Shares ETFs provide investors with exposure to the dynamics of market volatility. These ETFs are designed to track various volatility indexes or employ strategies that capitalize on volatility fluctuations. In this article, we will explore some of the best Volatility Shares ETFs available in the market, comparing them with similar options and highlighting their unique features.

Understanding Volatility Shares ETFs

Volatility Shares ETFs are specifically designed to provide exposure to market volatility. These ETFs can be valuable tools for investors who want to hedge against market downturns, take advantage of short-term trading opportunities, or diversify their portfolio.

One notable Volatility Shares ETF is the ProShares VIX Short-Term Futures ETF (VIXY). This ETF seeks to replicate the performance of the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts. VIXY offers exposure to the VIX, commonly known as the "fear gauge," and allows investors to profit from an increase in market volatility. It provides a liquid and efficient way to gain exposure to short-term VIX futures.

Compared to similar options in the market, such as the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) and the VelocityShares Daily 2x VIX Short-Term ETN (TVIX), VIXY stands out due to its structure as an ETF rather than an ETN (Exchange-Traded Note). Being an ETF, VIXY is not subject to credit risk, which is a consideration for ETNs. Additionally, VIXY has a lower expense ratio compared to VXX, making it a more cost-effective option for investors seeking exposure to VIX futures.

VIXY overlap What are the best Volatility Shares ETFs?

Understanding the Benefits of Volatility Shares ETFs

Volatility Shares ETFs offer several benefits to investors:

Diversification: Volatility Shares ETFs provide an opportunity to diversify investment portfolios, as their performance is not solely dependent on the direction of the overall market. During periods of market volatility, these ETFs can act as a hedge against downturns, reducing overall portfolio risk.

Liquidity: Volatility Shares ETFs, like VIXY, typically have high trading volumes and tight bid-ask spreads. This liquidity allows investors to easily enter or exit positions, enabling efficient execution of trading strategies.

Transparency: Volatility Shares ETFs disclose their holdings on a daily basis, providing transparency to investors. This allows investors to monitor the composition of the ETF and make informed investment decisions.

Exploring Investment Opportunities

Investors interested in volatility-related ETFs should consider their investment objectives, risk tolerance, and time horizon. While the ProShares VIX Short-Term Futures ETF (VIXY) is a noteworthy option, there are other Volatility Shares ETFs available that may align better with specific investment strategies.

Some other Volatility Shares ETFs worth considering include the iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ), which provides exposure to VIX futures with a longer duration, and the ProShares VIX Mid-Term Futures ETF (VIXM), which aims to replicate the performance of the S&P 500 VIX Mid-Term Futures Index. These ETFs allow investors to extend their exposure to volatility beyond the short-term.

Conclusion

Volatility Shares ETFs can be valuable tools for investors looking to manage risk, hedge against market downturns, or capitalize on short-term trading opportunities. The ProShares VIX Short-Term Futures ETF (VIXY) stands out as an option for investors seeking exposure to short-term VIX futures. However, it's essential to conduct thorough research, consider investment objectives, and consult with a financial advisor before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. We do not provide any investment advisory services. Investors should conduct their own research and seek professional advice before making investment decisions.

Sources:

https://finance.yahoo.com/ VXX ETF issuer
https://finance.yahoo.com/quote/VXX/ VXX ETF official page

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FAQ

What are Volatility Shares ETFs?
Volatility Shares ETFs are exchange-traded funds that aim to provide exposure to volatility or volatility-related strategies. These ETFs are designed to track the performance of volatility indexes or employ strategies that profit from market volatility.
How do Volatility Shares ETFs work?
Volatility Shares ETFs utilize various methods to track volatility, such as investing in futures contracts, options, or volatility derivatives. These ETFs aim to provide returns that correspond to the performance of the underlying volatility index or strategy.
What are the advantages of investing in Volatility Shares ETFs?
Investing in Volatility Shares ETFs can offer portfolio diversification, as volatility is often negatively correlated with traditional equity markets. These ETFs can serve as hedging tools during periods of market uncertainty and potentially provide opportunities for profit during volatile market conditions.
What factors should I consider when choosing Volatility Shares ETFs?
When selecting Volatility Shares ETFs, consider factors such as the underlying index or strategy, expense ratios, liquidity, trading volume, and the ETF provider's reputation. It's important to understand the specific approach and risks associated with each ETF.
Can you provide examples of reputable Volatility Shares ETF providers?
Some reputable providers of Volatility Shares ETFs include ProShares, VelocityShares, iPath, and WisdomTree. These providers offer a range of volatility-focused ETFs that cater to different investment objectives and strategies.