See this post for updated dividend information for IVV and VOO.
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Dividends from IVV and VOO
Friday, June 24th, 2011Whopper splits coming up for VelocityShares’ XIV and ZIV
Tuesday, June 21st, 2011Evidently the folks at VelocityShares decided that the shares of their inverse volatility offerings were way too pricey, because they are splitting their short term fund, XIV ten to one, and their medium term fund, ZIV by eight to one. Based on today’s closing prices of 167 for XIV and 132 for ZIV, they will both end up priced at around $16.50 after end of trading this Friday, June 24th, when the splits become effective.
This move strikes me as a strategy shift to broaden the appeal of the funds. They were introduced last November at around $100/share—not exactly cheap.
As long as an equity stays above $10/share I don’t much care what the price is. I’m looking for percentage moves. I question whether splits like this make much difference in the market. It will be interesting to monitor the volumes, spreads, etc., to see what the effects are.
For more information about these splits, see this news release.
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A big bet on XIV
Thursday, June 16th, 2011It looks like someone big thinks the market is going to have a upswing today—buying 100,000 shares of XIV in pre-market at 159.85 ($15.985 million). It could have been a sale, but I doubt it.
The exchanges show XIV trading over a million shares before market open today, but I’m assuming that’s an error because the only big trade that shows up is the 100,000 share block. If the volume number is correct it would be XIV’s first day with over a million shares traded. Reaching the 1 million share mark for the first time in pre-market would probably be unprecedented in the relatively short history of ETF/ETN type equities.
In other volatility related events, the June VIX options expired yesterday, with a settlement price (VRO) of 19.73 and the VIX index opening at 19.31. July VIX options won’t expire until July 20th—it is one of those times when they expire later in the month than the equity options. For tickers on VRO, VIX, and other related volatility related products see volatility tickers.
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Mostly quiet on the volatility front
Wednesday, May 11th, 2011There haven’t been any new volatility ETNs or ETFs introduced for almost 4 months now, so it is about time for another wave. In April options were introduced on VelocityShares VIIX (a VXX wannabe), but it’s hard to see how these can compete effectively with VXX’s options.
The funds that are attracting the most interest (and likely additional competitors) are VelocityShares’ 2X short term TVIX and their inverse volatility fund XIV. The daily volumes on these two have been exceeding 1 million and 200K respectively, while the rest of the newer funds are lucky to get 10k shares per day. ProShares VIXY (VXX wannabe) is the exception to that, with growing volume that is getting into the 300K per day range. It is a mystery to me why it’s gaining popularity—perhaps because it is an ETF, not an ETN.
TVIX has a big lead over CVOL, which offers a similar 2X strategy and XIV is gaining ground over Barclay’s XXV and IVO inverse funds. XIV’s leadership is not surprising— it’s a much better choice than XXV & IVO’s short VXX approach. I’ll write more on this in a couple of days.
For a summary of all the available volatility ETNs and ETFs see Volatility Tickers.
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XVIX: raise, hold, or fold?
Saturday, April 30th, 2011I bought a fair amount of XVIX in January—it has not been good bet so far. Recently it has been trading near the $25.41 price that I paid, so I’m taking a look at what I should do on the next round.
UBS’ E-TRACS XVIX ETN is designed to take advantage of the volatility futures contango that torments Barclays’ popular VXX ETN. VXX provides a way to go long on volatility—which in theory provides a good hedge against sudden market drops. However, since VXX is based on the performance of the two nearest term volatility futures it underperforms relative to the VIX index, and suffers ongoing price erosion as its futures have to be rolled over to longer term futures (this is done incrementally on a daily basis).
XVIX attempts to capitalize on this erosion by taking the opposite position that VXX does, being short these futures, and then hedging against big spikes in volatility by buying longer term volatility futures—the same set that Barclays’ VXZ uses. It has only been around since December 2010, but historically XVIX’s strategy has averaged a 24% annual gain over the last 5 years. For more information on the historical performance of this strategy see this article in Volatility Futures and Options.
This year, after 4 months XVIX is down 2.3%, and it has been down as much as 9.5% for the year. Is this just a momentary setback, or are XVIX’s underlying assumptions no longer valid?
Bloomberg provides charts with up to 5 years of historical data on the indexes that these ETNs are based on. The Bloomberg chart below shows how the indexes for XVIX, VXX (long short term volatility), and VXZ (medium term volatility) have behaved over the last five years.
The chart tells the story for VXIV’s lack of performance. The short term future index (green line) continues to erode due to contango, but the medium term index (reddish orange line ) has been dropping at a unprecedented rate ( for a bull market) since around August of 2010. XVIX won’t be going up much until this drop-off stops. The medium term index won’t drop to zero, because volatility is mean-reverting, but if it’s going to drop to 2007 levels it still has a ways to go. It is also interesting to look at the medium term index vs the VIX cash index.
I think it is reasonable that the medium term index will level out around the pre-financial crash 2008 levels—where it is now. With increasing asset correlation and a fairly nervous market I don’t expect medium term volatility futures to drop much more. For the time being, I’m going to hold my position. When the medium term futures level out, I will probably increase my bet.
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Adding back in some XIV
Tuesday, April 12th, 2011Bought some XIV this morning at 140.05.
Interesting, at 11:15 ET VIX is up almost 11%, but the volatility futures are not playing along. VXX is only up 2.3% —normally I would expect more like 50% of the VIX move on a mid-week day with no weekend effect to confuse things. So far the volatility futures traders are not betting on a big dip.
Lightening up on XIV
Tuesday, April 5th, 2011VelocityShares’ XIV inverse volatility ETN has risen 37% from a low of 105.48 on March 16th to close at 144.47 today, April 5th. Today, with the VIX starting to flirt with pre-Japan Earthquake lows I decided to lighten up the position in XIV that I had built up during the correction, reducing it by 40%. For more information on XIV see this post.
The gains from XIV have probably switched from “fast mode”, driven by the rapid drop in volatility as the market recovers from the correction, into “slow mode”—driven by the ongoing contango that VXX suffers and XIV benefits from. It is tempting to keep the whole XIV position on the table to benefit from this tail wind, but the risk of volatility spiking up seems to be pretty high. The market is looking a little toppy.
Sailing through the IEF ex-dividend
Saturday, April 2nd, 2011IEF, Barclays 7-10 year Treasury note ETF, went ex-dividend April 1st with a declared dividend of $0.248 per share. Somewhat surprisingly my IEF + DTYS hedge didn’t dip at all, closing at 146.11, the same close as the 31st. I don’t see any reason why DTYS should go up on IEF’s ex-dividend date—and it is probably just a random thing. I’m not complaining. During the day the hedge went as high as 146.24. The average price of the IEF+DTYS hedge since DTYS started trading in August 2010 is 146.17.
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