Originally posted July 18, 2011 Update: VZZB terminated in October 2012, consistent with the 1.5 years or less of life that I predicted below. Barclays didn’t waste any time replacing its recently terminated VZZ ETN. The new fund, targeted at leveraged long performance relative to medium term volatility appears essentially identical to VZZ except for its new inception point (8-Jul-2011). Rather than follow daily percentage moves, Barclay’s …
I think the big picture on the overall economic situation is pretty scary right now. The factors I see, in increasing scariness: The debt limit drama in Washington is probably only a side show, but each side might believe that a bit of a crisis might help their cause. The USA economy is cooling off a bit, with the companies mortally wounded by the …
If you are looking for low risk yields above 1.5% per year, there aren’t many attractive candidates. Stocks seem risky, and if you believe that interest rates are going to go up in the next couple of years then bonds look risky too. Using IEF, Ishares’ 7 to 10 year US treasury bond fund as a example of risk—it is currently yielding 2.21%. Sensitivity …
As of next Monday, July 11th VZZ, Barclays’ iPath® Long Enhanced S&P 500 VIX Mid-Term Futures will stop trading. It is already a zombie because its termination price has already been set at $10 even. XXV, the other volatility zombie continues to trade on average 100,000 shares a day—maybe people are content to just beat T-bills and not much else. See these posts for more details on …
All of the volatility based ETN/ETF products are relatively new. Barclays’ VXX and VXZ oldsters started in January 2009—just a few months before the end of the 2008/2009 crash. This lack of historical data over full market cycles makes it hard to assess the risks associated with new products—such as VelocityShares’ ZIV (medium-term inverse volatility) which started in November 2010. test I have backtested ZIV starting from …
