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Thursday, January 30, 2014

Canada has an inverse VIX ETF didja know


I like buying the US ETF XIV when I feel the US market has bottomed and should be moving back up. Problem is, I end up getting reamed on currency exchange.

Well, I looked on the internet today, and gosh darn it wouldn't you know, Canada now has a TSX-listed short VIX ETF:

Horizons - HVI, inverse VIX futures ETF.

I don't know why the short-Vixes don't seem to get slaughtered over time on rollover; it's something I still have to figure out. For some reason, they perform significantly better than the underlying market that you're playing the volatility of: 2-3 times when you compare XIV to SPY, for example.

Also, I don't like how XIV in the US has seen an explosion in volume since late 2011: this is making me wonder if (I dunno if I even make any sense here) all that new participation is arbing away options volatility, which would provide a false signal to the US market, in the long term making it run up a lot stronger than it should if the volatility premium is being artificially repressed.

Still, at least there's now a Canadian inverse VIX ETF, which makes me very happy indeed. Thanks, Horizons!


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