Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Three New Risk Control ETFs from Direxion

Wed, Jan 11, 12:21 PM ET, by Bill Luby

Today Direxion announced they have launched three ETFs whose intent is to match their exposure to an underlying equity index based upon current levels of market volatility. The new ETFs are as follows:

  • Direxion S&P 500 RC Volatility Response Shares (VSPY)
  • Direxion S&P 1500 RC Volatility Response Shares (VSPR)
  • Direxion S&P Latin America 40 RC Volatility Response Shares (VLAT)

The launch of these ETFs expands Direxion's stable of what they call "rules-based index ETFs," which began with two ETFs that are based on insider trading data: INSD and KNOW. The three new ETFs also arrive just five days after S&P announced a new S&P Dynamic Rebalancing Risk Control Index Series, which provides the basis for evaluating volatility and matching equity exposure to anticipated risk.

The intent of these ETFs is spelled out by Direxion:

"The Funds embody a rules-based investment approach that uses volatility as a gauge to determine equity exposure. They operate according to the principle that exposure to equities should be reduced during periods of higher overall market volatility, and increased during periods of a more stable (lower volatility) market environment. Each Fund has a target volatility level for its corresponding index. When volatility moves above those levels, the Funds will increase their exposure to U.S. Treasuries and decrease their exposure to equities. The Funds will proportionately increase exposure to equities during periods of low market volatility."

Readers with sharp memories may recall that back in July 2010, Direxion was the first ETF provider to announce that they would be launching a product based on the S&P 500 Dynamic VEQTOR Index, which was an effort to mitigate risk with a dynamic allocation of VIX short-term futures, essentially the equivalent of sizing a VXX hedge based on observed levels of implied volatility and historical volatility. I am not sure why Direxion's VEQTOR product never saw the light of day, but Barclays ended up with one of the few successful VIX ETPs in 2011 (see VIX Exchange-Traded Products: The Year in Review, 2011) with its Barclays ETN+ S&P VEQTOR ETN (VQT) product, which I made a strong case for back in October 2010 in The Case for VQT.

One of the interesting aspects of the approach taken by VSPY, VSPR and VLAT is that these products will tend to have minimum exposure when the VIX is at its highest - and as anyone who has ever looked a chart of the VIX and SPX/SPY knows, this is typically when stocks bottom and begin a sharp bullish move.

With impeccable timing, EconomPic Data just happened to publish a study yesterday, VIX as a Predictor of Equity Returns, which concluded that for the most part, SPY daily returns were much higher with an elevated VIX than with a historically low VIX.

All this raises the question of how to play increased volatility and risk. In the land of ETPs, there are quite a few alternatives, including:

  • Barclays ETN+ S&P VEQTOR ETN (VQT) - dynamically hedge with a long VIX futures position
  • Direxion's VSPY and VSPR to dynamically adjust exposure to equities
  • PowerShares low volatility (SPLV) and high beta (SPHB) approaches for manual market timing
  • ETRACS Fisher-Gartman Risk On ETN (ONN) and ETRACS Fisher-Gartman Risk Off ETN (OFF) - for those who wish to manually time the multi-asset class risk on/risk off trade

Investors who believe they are more adept at timing the market may prefer to avoid the rules-based products that dynamically adjust exposure based on a static risk measurement mechanism. For those who prefer not to watch their portfolio closely or are not convinced that they can do a better job than the likes of VQT, VSPY and perhaps SPLV, the new category of dynamic risk exposure products should provide some excellent tools for portfolio augmentation and in some cases, portfolio replacement.

Related posts:

Disclosure(s): short VXX at time of writing



SDI Glossary: "Equity" Definition
SDI Glossary: "Exchange" Definition
SDI Glossary: "ETFs" Definition
SDI Glossary: "Hedging" Definition
SDI Glossary: "Risk" Definition
SDI Glossary: "VIX" Definition
This Article's Word Cloud:   Barclays   Direxion   Dynamic   ETFs   ETPs   Funds   Gartman   Products   Response   Risk   Shares   VSPR   VSPY   Volatility   Year   adjust   back   based   during   dynamic   dynamically   equities   equity   exposure   futures   have   hedge   increased   index   levels   market   periods   portfolio   product   products   risk   rules   stable   that   their   these   they   those   time   timing   volatility   when   which   will   with

| More

Financial Stocks Liking the Prospect of Higher Fed Rates XLF FAS
Mon, Aug 29, 3:41 PM ET, by Corey Rosenbloom

The Financial and Bank stocks are loving the prospect of higher rates from the Federal ...

Beginning a Bearish Arc Lower for Tesla TSLA
Mon, Aug 29, 1:41 PM ET, by Corey Rosenbloom

Is Tesla (TSLA) about to fall off the cliff and plunge lower, completing another “Arc” ...

Rush to the Highs Emini Fibonacci Bounce Update Aug 29
Mon, Aug 29, 1:31 PM ET, by Corey Rosenbloom

Back toward the highs we go! It’s almost as if Chair Yellen said nothing that ...

Thanks Yellen Emini Fibonacci Grid Update August 26
Fri, Aug 26, 1:31 PM ET, by Corey Rosenbloom

Well THAT got interesting fast! Chair Yellen strongly hinted that conditions allow for a near-term ...

Gold's Collapse into Key Support Target August 25
Thu, Aug 25, 12:11 PM ET, by Corey Rosenbloom

Gold completed a Triangle and Price Projection Target toward the prior low which sets up ...

Bouncing Market Emini Fibonacci Grid Update August 25
Thu, Aug 25, 11:51 AM ET, by Corey Rosenbloom

After harshly joking about it Tuesday, we actually did get our expected pullback to a ...

Parabolic Arc and Big Rally for Novatel MIFI Analysis
Tue, Aug 23, 1:21 PM ET, by Corey Rosenbloom

Parabolic Arc, textbook Elliott third wave, to-the-penny 50% Fibonacci. These are just some of the ...

Never a Pullback Emini Fibonacci Grid Aug 23
Tue, Aug 23, 1:11 PM ET, by Corey Rosenbloom

Beuller? Beuller? Beuller? Pullback? Pullback? Pullback? Here’s today’s updated Fibonacci and Emini (@ES) trading levels ...

A Play for Whole Foods WFM Off Critical Support
Mon, Aug 22, 4:11 PM ET, by Corey Rosenbloom

Is it time to buy Whole Foods stock (WFM) for a rapid bounce swing trade? ...

Year to Date Sector Rotation Insights August 2016
Mon, Aug 22, 12:21 PM ET, by Corey Rosenbloom

Bull? Bear? Top forming? What’s the message from the Sector Rotation Model at the moment? ...

Range Continues for Emini Fibonacci Intraday Update Aug 22
Mon, Aug 22, 12:11 PM ET, by Corey Rosenbloom

One day we’ll get a breakout from this repeating range in the S&P 500 – ...

August 18 Emini Intraday Trading Levels Update
Thu, Aug 18, 12:21 PM ET, by Corey Rosenbloom

A short-term trading range for the @ES futures – similar to July – is repeating ...

Midday Successful Emini Fibonacci Bounce Update
Wed, Aug 17, 1:51 PM ET, by Corey Rosenbloom

Here’s a quick mid-day update of the point-perfect Fibonacci Retracement Level reversal for the @ES ...

A Perfect Pullback Lesson from Amazon AMZN
Wed, Aug 17, 12:11 PM ET, by Corey Rosenbloom

Amazon.com (AMZN) offers us a great lesson – and current opportunity – to study “Perfect ...

Technology and Utility ETFs Go Their Own Way XLK XLU
Tue, Aug 16, 12:11 PM ET, by Corey Rosenbloom

“You can go your own way!” was famously sung by Fleetwood Mac and for the ...

Small Pullback from the Highs Emini Fibonacci Grid Aug 16
Tue, Aug 16, 11:51 AM ET, by Corey Rosenbloom

Pullback? Updated levels? Uptrend continuing? Let’s take a look at our morning update. Here’s today’s ...

Start Your Monday with Corey and the Timing Research Show
Sat, Aug 13, 9:51 PM ET, by Corey Rosenbloom

I’m excited to announce that I’ll be returning to join a an exciting and informative ...

Gold Gone Wild with High Volatility Reversals
Fri, Aug 12, 3:11 PM ET, by Corey Rosenbloom

Gold (@GC) picked up volatility with large gaps and intraday strong reversals. Let’s pinpoint the ...

US Steel X Falls to Critical Support Pivot Trade
Fri, Aug 12, 12:21 PM ET, by Corey Rosenbloom

US Steel (X) surprised with a steeper retracement than expected, collapsing down from $28 to ...

August 12 Exciting Emini Fibonacci Grid Update
Fri, Aug 12, 12:11 PM ET, by Corey Rosenbloom

We’re seeing additional movement through our key Fibonacci Grid Levels. Here’s today’s updated Fibonacci and ...

NVIDIA NVDA Keeps Impressing with New Uptrend Highs
Thu, Aug 11, 4:11 PM ET, by Corey Rosenbloom

NVIDIA (NVDA) continues its strong bullish uptrend, giving us another example of the superiority of ...

Hey Our Emini Fibonacci Levels are Working August 11
Thu, Aug 11, 1:41 PM ET, by Corey Rosenbloom

If you followed our update from yesterday, you had a perfect plan for profit on ...

Dual Divergent Reversals in Stocks and Crude Oil
Wed, Aug 10, 2:41 PM ET, by Corey Rosenbloom

After holding at the highs, Stocks reversed lower today from their lofty heights. Crude Oil ...

Emini Pullback Planning Fibonacci Grid August 10
Wed, Aug 10, 2:31 PM ET, by Corey Rosenbloom

Here’s our update for today! Price pulled back and broke under our upper Fibonacci Level ...

GoPro GPRO Boldly Breaks Resistance into Bullish Zone
Mon, Aug 8, 1:11 PM ET, by Corey Rosenbloom

We’re seeing GoPro Inc (GPRO) flash on our stock scan this morning as it’s breaking ...

New Emini Fibonacci Retracement Grid August 8
Mon, Aug 8, 12:41 PM ET, by Corey Rosenbloom

Price jumped higher into the 2,180 @ES level this morning and (so far) pulled back ...

Join Corey for a Live Trading Challenge at the San Francisco Money Show August 24
Fri, Aug 5, 1:51 PM ET, by Corey Rosenbloom

I’m so excited about this opportunity! Join me live as I accept a live, real-money ...

Jobs Report Breakout to New Highs Emini Update Aug 5
Fri, Aug 5, 12:51 PM ET, by Corey Rosenbloom

Breakout! Short-Squeeze! Better than Expected Jobs Report! Buyers took control away from the bears today, ...

The Twitter Trap TWTR a Bear Trap Reversal
Thu, Aug 4, 2:21 PM ET, by Corey Rosenbloom

Bear Trap! Twitter shares surprised investors and traders with a strong gap lower in late ...

Flag Bounce Emini Fibonacci Grid Update August 4
Thu, Aug 4, 2:11 PM ET, by Corey Rosenbloom

Our Bounce Continued – price fell toward our initial Fibonacci Target and has now bounced ...

Crude Oil Finally Bounces and May Reverse Short Term Downtrend
Wed, Aug 3, 1:41 PM ET, by Corey Rosenbloom

Is Crude Oil @CL Snapping its Downtrend? After a persistent swing down from $50.00 toward ...

Fibonacci Bounce Emini Update Aug 3
Wed, Aug 3, 12:11 PM ET, by Corey Rosenbloom

Yesterday’s sell-swing took us straight to our Fibonacci Retracement target ahead of a bounce up ...

Back to the 20 Day EMA Target We Go Aug 2
Tue, Aug 2, 11:51 AM ET, by Corey Rosenbloom

In an uptrend price typically swings higher then pulls back toward a rising moving average. ...

Hey The Emini Fibonacci Grid Worked Update August 2
Tue, Aug 2, 11:31 AM ET, by Corey Rosenbloom

While price expanded the lengthy trading range, we saw this morning’s price action pull back ...

The BlackBerry Breakout BBRY August 1
Mon, Aug 1, 2:11 PM ET, by Corey Rosenbloom

BlackBerry shares (BBRY) broke free of daily and weekly resistance, triggering a new bullish phase. ...

Range Range Range Emini Market Update August 1
Mon, Aug 1, 12:31 PM ET, by Corey Rosenbloom

Price was on a volatile arc this morning that keep us within the lengthy trading ...

Quirks and Reversals in the Quad Market Grid Gold Oil Dollar
Fri, Jul 29, 12:31 PM ET, by Corey Rosenbloom

The weaker than expected GDP report this morning spiked volatility higher in our quad-market grid. ...

GDP Surprise Breakout from Emini Range July 29
Fri, Jul 29, 12:21 PM ET, by Corey Rosenbloom

A weaker than expected GDP report this morning was exactly the bullish catalyst needed to ...

The Seriously Strong Uptrend and New All Time High for Facebook FB
Thu, Jul 28, 1:21 PM ET, by Corey Rosenbloom

“Strong stocks tend to get stronger.” Facebook (FB) shares gave us another example of this ...

The Not New Same Emini Fibonacci Levels in the Range Update July 28
Thu, Jul 28, 1:11 PM ET, by Corey Rosenbloom

With the Fed NOT raising rates as expected, price responded with little fanfare – or ...

The Fed Does Nothing but Keep the Current Range Going
Wed, Jul 27, 3:31 PM ET, by Corey Rosenbloom

As widely expected, and with little fanfare, the Fed did absolutely nothing today except keep ...

Fed Day Emini Fibonacci Pullback Grid July 27
Wed, Jul 27, 12:11 PM ET, by Corey Rosenbloom

The Fed won’t raise rates later today at their meeting, and the market could rally ...

Triangle Midday Market Update and Stock Scan July 26
Tue, Jul 26, 4:11 PM ET, by Corey Rosenbloom

Today’s market activity was a volatile, big swing event that resulted in an intraday triangle ...

Down Goes McDonalds MCD July 26
Tue, Jul 26, 10:41 AM ET, by Corey Rosenbloom

McDonald’s (MCD) gives us another example of what can endlessly frustrate new traders. Beating earnings, ...

Same Pullback Same Emini Fibonacci Grid Plan July 25
Mon, Jul 25, 12:21 PM ET, by Corey Rosenbloom

We start the new week with clear echoes to last week. Namely, we’re still trading ...

Down Drips Crude Oil to New Swing Lows July 22
Fri, Jul 22, 2:15 PM ET, by Corey Rosenbloom

In a somewhat surprising outcome, Crude Oil dips to a new swing low at the ...

Yahoo YHOO Surprises with Bullish Breakout into Open Air
Fri, Jul 22, 12:35 PM ET, by Corey Rosenbloom

As the stock market bull continues, we continue to see stocks breakout to new highs. ...

The Raging Bull Continues Emini Grid Update July 22
Fri, Jul 22, 12:15 PM ET, by Corey Rosenbloom

Bear? What Bear? Are there any bears left in the world? Price retraced toward, then ...

Might This Be the Actual Pullback Emini Fibonacci Grid July 21
Thu, Jul 21, 2:15 PM ET, by Corey Rosenbloom

Is this our first actual pullback since the early July breakout?! Here’s today’s updated Fibonacci ...

Neverending Bull Market Breakout and Stock Scan July 20
Wed, Jul 20, 3:55 PM ET, by Corey Rosenbloom

Buyers continued to short-squeeze the market through to new all-time highs! Let’s update our levels ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Three New Risk Control ETFs from Direxion | Self Directed Investor | Copyright © 2008 - 2016, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of serious individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.