Download PAUL BRITT

Moderator:
PAUL BRITT
Senior ETF Analyst
ETF.com
VIX & Volatility:
Panelists:
An Expensive
Hedge & Why
You Need To
Own It
RICHARD BLOCK
SVP, Head of F-Squared Capital Trading
F-Squared Investments
CORY BURNELL
CIO
Blueprint Wealth Partners
NICK CHERNEY
CIO, Velocity Shares
Head of exchange traded products, Janus Capital
TIM EDWARDS
Senior Director of Index Investment Strategy
S&P Dow Jones Indices
VIX & Volatility:
An Expensive
Hedge & Why
You Need To
Own It
Moderator:
PAUL BRITT
Senior ETF Analyst
ETF.com
Speakers:
RICHARD BLOCK
NICK CHERNEY
SVP, Head of F-Squared
Capital Trading
F-Squared Investments
CIO, Velocity Shares
Head of exchange traded
products, Janus Capital
CORY BURNELL
TIM EDWARDS
CIO
Blueprint Wealth Partners
Senior Director of Index
Investment Strategy
S&P Dow Jones Indices
VIX & Volatility – 3 Themes
• Long Volatility as a Hedge
• Short Volatility
• How to Implement
Volatility 101: The Allure of the VIX
30%
Oct 9, 2014
25%
20%
15%
10%
5%
0%
-5%
S&P 500
VIX Index
Source Bloomberg SPXT index & VIX Index
Volatility 101: Can’t Buy the VIX Index
Returns %
VXX ETN
VIX Index
100
80
60
40
20
0
-20
-40
-60
Source Bloomberg – 12/31.2013- 12/31/2014
Volatility 101: Typical VIX Futures Curve
$21
$20
$19
$18
$17
$16
$15
$14
$13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Source Bloomberg, as of 2/6/2013
Volatility 101: Expensive Insurance
S&P 500
Return %
ST VIX Futures
150
100
50
0
-50
-100
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source Bloomberg- SPXT Index and SPVXSTR Index
Volatility 101: Very Liquid; High Turnover
iPath S&P 500 VIX Short-Term Futures ETN (VXX):
Assets Under Management
Average Daily $ Volume
$894M
$1.29B
VelocityShares Daily Inverse VIX Short Term ETN (XIV):
Assets Under Management
Average Daily $ Volume
$903M
$591M
-ETF.com Jan 20 2015
Speakers:
RICHARD BLOCK
NICK CHERNEY
SVP, Head of F-Squared
Capital Trading
F-Squared Investments
CIO, Velocity Shares
Head of exchange traded
products, Janus Capital
CORY BURNELL
TIM EDWARDS
CIO
Blueprint Wealth Partners
Senior Director of Index
Investment Strategy
S&P Dow Jones Indices
VIX & Volatility – The Cost Of Hedging
VIX Futures and Contango: 2007-2014
50
10%
2nd to 1st Futures Differential (6M rolling average, %)
Aug 2014
Dec 2013
-15%
Apr 2013
0
Aug 2012
-10%
Dec 2011
10
Apr 2011
-5%
Aug 2010
20
Dec 2009
0%
Apr 2009
30
Aug 2008
5%
Dec 2007
40
Apr 2007
1st VIX Futures Closing Price
Front VIX Futures Price (6M rolling average)
Backwardation
15%
Contango
60
Sources: CBOE, S&P Dow Jones Indices as of December 2014
Speakers:
RICHARD BLOCK
NICK CHERNEY
SVP, Head of F-Squared
Capital Trading
F-Squared Investments
CIO, Velocity Shares
Head of exchange traded
products, Janus Capital
CORY BURNELL
TIM EDWARDS
CIO
Blueprint Wealth Partners
Senior Director of Index
Investment Strategy
S&P Dow Jones Indices
VIX & Volatility: Dynamic Equity Hedge (VQT/PHDG)
Allocation Inputs
Allocation Output
• Realized Volatility
Equity
• VIX Index Trend
VIX Futures
or
Cash
Source: S&P 500 Dynamic VEQTOR Index Series Methodology July 2014
VIX & Volatility: Long /Short Tail Risk Hedge (TRSK)
+ 2x
- 1x
Net
45%
55%
35%
Source Velocity Shares’ Hedged Equity ETFs Sept. 2014
VIX & Volatility: Leading Pure-Play Volatility ETFs
Ticker
Fund Name
Gearing
VXX
iPath S&P 500 VIX ST Futures ETN
none
XIV
Velocity Shares Daily Inverse VIX ST ETN Inverse 1x
UVXY
ProShares Ultra VIX ST Futures
Leveraged 2x
Source: ETF.com Leading ETFs by AUM 1/12/2015
Speakers:
RICHARD BLOCK
NICK CHERNEY
SVP, Head of F-Squared
Capital Trading
F-Squared Investments
CIO, Velocity Shares
Head of exchange traded
products, Janus Capital
CORY BURNELL
TIM EDWARDS
CIO
Blueprint Wealth Partners
Senior Director of Index
Investment Strategy
S&P Dow Jones Indices
VIX & Volatility – 3 Themes
• Long Volatility as a Hedge
• Short Volatility
• How to Implement
Thank You.
Questions?