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   Case   Direxion   Dynamic   ETFs   ETPs   Funds   Gartman   Index   Products   Response   Risk   Shares   Traded   VSPR   VSPY   Volatility   Year   adjust   based   during   dynamic   dynamically   equities   equity   exposure   futures   hedge   increased   index   just   levels   market   periods   portfolio   product   products   risk   rules   stable   that   their   these   they   those   timing   volatility   which   will   with

| More

Join John Carter Thursday for a Trading Options Like a Pro Webinar
Sat, Jul 26, 1:31 PM ET, by Corey Rosenbloom

I’m excited to announce an upcoming featured webinar by John Carter on Thursday, July 31st ...

Interesting Arc Pattern Forming Buy Signal in Harley Davidson HOG
Fri, Jul 25, 1:51 PM ET, by Corey Rosenbloom

What fascinating pattern is developing into a key support level for Harley Davidson (HOG) shares? ...

The Divergences are Working July 25 Market Update
Fri, Jul 25, 1:11 PM ET, by Corey Rosenbloom

I’m actually a little surprised that the market is falling like it “should” be doing, ...

SP500 Gasping at New Highs with Cautious Divergences
Thu, Jul 24, 1:21 PM ET, by Corey Rosenbloom

We’re seeing a familiar Hollywood script play out with price chugging to new highs as ...

Breaking Down and Away from the Highs in Electronic Arts EA
Wed, Jul 23, 3:21 PM ET, by Corey Rosenbloom

Electronic Arts (EA) surprised to the upside yesterday on earnings but failed to impress traders ...

July 23 Breakout Impulse Update and Stock Scan
Wed, Jul 23, 2:31 PM ET, by Corey Rosenbloom

Once again we ask the question, “How high can this market go?” Today saw a ...

Try Out Seven Days of Professional Market Analysis This Week
Tue, Jul 22, 5:41 PM ET, by Corey Rosenbloom

If you’ve ever wanted to know what’s behind the pay-wall (membership site) of Elliott Wave ...

July 22 Midday Trend Day Update and Trending Stock Scan
Tue, Jul 22, 1:31 PM ET, by Corey Rosenbloom

How high can this market bounce? Let’s take a look at our new S&P 500 ...

Join Corey Each Tuesday for a Live Morning Market Briefing with TradeStation
Mon, Jul 21, 7:11 PM ET, by Corey Rosenbloom

Start your Tuesday fresh with live market commentary, updates, and analysis from Corey as he ...

July 21 Bounce and Fibonacci Update with Stock Scan
Mon, Jul 21, 1:11 PM ET, by Corey Rosenbloom

With the morning sell-off and current bounce off a key Fibonacci Level, what price targets ...

Focusing on Just the Rallies - an Interesting Pattern Emerges
Fri, Jul 18, 2:40 PM ET, by Corey Rosenbloom

What does price reveal if we focus on “just” the recent rallies? A stealth bullish ...

July 17 Midday Intraday Update and Daily Stock Scan
Thu, Jul 17, 2:43 PM ET, by Corey Rosenbloom

With the geopolitical news affecting markets, traders seem to be adopting a “Sell First, Ask ...

July 16 Stock Scan and Intraday Trading Update
Wed, Jul 16, 2:53 PM ET, by Corey Rosenbloom

The bull trend continues higher today but what levels are important and which stocks are ...

Learn the Five Steps to Spot and Trade Rounded Reversals in a Live Webinar Wednesday
Mon, Jul 14, 5:30 PM ET, by Corey Rosenbloom

Have you ever been stumped by elusive market reversals? Would you like to learn the ...

July 14 Level Watching and Trending Stock Scan Update
Mon, Jul 14, 3:13 PM ET, by Corey Rosenbloom

What should we be watching in today’s market breakout? Let’s start with our “Sector Breadth” ...

Planning a Breakout and Watching Key Levels in Amazon AMZN
Fri, Jul 11, 12:28 PM ET, by Corey Rosenbloom

Amazon.com is showing signs of life this morning with a range breakout into a key ...

July 10 Bear Trap Intraday Update and Stock Scan
Thu, Jul 10, 2:38 PM ET, by Corey Rosenbloom

With price breaking under the rising parallel trendline channel, the expectation was for a logical ...

Join Corey for a Webinar Thursday July 10 on Trading Short Squeeze Breakouts
Wed, Jul 9, 12:47 PM ET, by Corey Rosenbloom

I’m excited to present a featured webinar with Trader Kingdom this Thursday, July 10th at ...

Plotting the New SP500 Price Structure Pathway off Support
Wed, Jul 9, 11:28 AM ET, by Corey Rosenbloom

I wanted to update the simple “Color Price Structure” chart I’ve been showing all week ...

July 8 Sell Swing Intraday Update and Stock Scan
Tue, Jul 8, 2:38 PM ET, by Corey Rosenbloom

Today continued the expected sell-swing already in motion and price achieved its downside target (see ...

Updating SP500 Structure as Expected and Planning the Next Swing Again
Tue, Jul 8, 12:24 PM ET, by Corey Rosenbloom

If you followed yesterday’s morning update, then you’ll find today’s market action is exactly what ...

July 7 Intraday Update Level Planning and Stock Scan
Mon, Jul 7, 3:02 PM ET, by Corey Rosenbloom

What levels are we watching at the moment and which stocks are setting up as ...

Trading Opportunities from July Consecutive Up Closes Stock Scan
Thu, Jul 3, 2:56 PM ET, by Corey Rosenbloom

During the recent non-stop bullish price rally, which stocks have closed the most days in ...

Quick Charting the 12 Strong Trending Dow Stocks at 52 Week Highs
Wed, Jul 2, 4:43 PM ET, by Corey Rosenbloom

Of the 30 stocks in the Dow Jones Industrial Index, which 12 stand “head and ...

The Key Support Level Bonds TLT Must Hold to Prevent a Bearish Reversal
Wed, Jul 2, 2:29 PM ET, by Corey Rosenbloom

What support level must bond fund TLT hold or else trigger a breakdown/reversal event? Let’s ...

Netflix NFLX and the July Breakout through Resistance
Tue, Jul 1, 6:11 PM ET, by Corey Rosenbloom

Like the rest of the market, Netflix shares (NFLX) continued their uptrend with a shattering ...

Updating the Breakout into Open Air for 3D Systems DDD
Mon, Jun 30, 2:46 PM ET, by Corey Rosenbloom

Last week I highlighted a “Tracking a Reversal and Breakout Opportunity for 3D Systems DDD” ...

Charting Another Breakout in Volatile MannKind MNKD
Mon, Jun 30, 1:28 PM ET, by Corey Rosenbloom

Volatile stock MannKind (MNKD) crossed traders’ scans this morning with a breakout opportunity. Let’s take ...

June 26 Bear Flag Stock Market Update and Scan
Thu, Jun 26, 2:43 PM ET, by Corey Rosenbloom

Today’s session resulted in another sharp sell-off and “flag” style retracement for the S&P 500. ...

June 25 GDP Surprise Market Update and Stock Scan
Wed, Jun 25, 2:39 PM ET, by Corey Rosenbloom

The S&P 500 is retracing the losses from yesterday’s Morning Bull Trap and afternoon collapse ...

June 24 Rounded Reversal Intraday Trading Update
Tue, Jun 24, 2:43 PM ET, by Corey Rosenbloom

Well that was exciting! The S&P 500 initially triggered the alternate breakout (above 1,964) thesis ...

Tracking a Reversal and Breakout Buy Signal Trade in DDD
Mon, Jun 23, 7:13 PM ET, by Corey Rosenbloom

A potential breakout buy (and short-term trend reversal) signal is developing in 3D Printing Stock ...

June 23 Intraday Trading Update and Stock Scan
Mon, Jun 23, 2:33 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

Friday June 20 Market Update and Stock Scan
Fri, Jun 20, 2:48 PM ET, by Corey Rosenbloom

After a continuation of the Fed-Day rally, stocks paused today in a consolidation range. Let’s ...

Trade and Price Pathway Planning for Amazon AMZN
Thu, Jun 19, 3:48 PM ET, by Corey Rosenbloom

With the recent announcement of Amazon’s new phone, shares initially surged but then retraced all ...

June 19 Intraday Trading and Stock Scan Update
Thu, Jun 19, 1:46 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

June 17 Intraday Trading Stock Scan and Market Update
Tue, Jun 17, 2:44 PM ET, by Corey Rosenbloom

While yesterday’s session developed a clear Range Day, today’s session is balancing on the edge ...

LULU Reveals a Valuable Lesson on Enormous Distribution Top Patterns
Tue, Jun 17, 12:28 PM ET, by Corey Rosenbloom

Traders are often drawn to reversal patterns, and Lululemon (LULU) gives us a textbook lesson ...

June 16 Range and Stock Scan Intraday Trading Update
Mon, Jun 16, 2:43 PM ET, by Corey Rosenbloom

We’re seeing another Range Day develop so far in the market. Let’s update our intraday ...

Daily and Weekly Updating Apple AAPL Retracement for June 16
Mon, Jun 16, 12:28 PM ET, by Corey Rosenbloom

Apple shares (AAPL) continued their breakout and bull trend impulse after the late-April gap breakout ...

June 12 Sell Swing Continues Midday Stock Scan and Update
Thu, Jun 12, 2:38 PM ET, by Corey Rosenbloom

Although it should be happening, it’s still surprising to see the market actually decline after ...

June 11 Breakdown Sell Day Stock Scan and Update
Wed, Jun 11, 2:43 PM ET, by Corey Rosenbloom

We’re finally seeing some downside action! I was beginning to think that the market could ...

How Overextended is the SP500 Right Now in June?
Tue, Jun 10, 4:54 PM ET, by Corey Rosenbloom

I wanted to take a quick look at the current strong rally and objectively compare ...

June 10 Range Trading Stock Scan and Intraday Update
Tue, Jun 10, 2:39 PM ET, by Corey Rosenbloom

Today’s session gave us something a little different than the usual “straight up” price action ...

June 9 Intraday Reversal Stock Scan and Trading Update
Mon, Jun 9, 2:41 PM ET, by Corey Rosenbloom

While the breakout “short-squeeze” impulse market initially continued this morning through new highs, we saw ...

June 6 Similar Stimulus Short Squeeze Breakout Stock Scan
Fri, Jun 6, 2:11 PM ET, by Corey Rosenbloom

The breakout and impulsive bullish price action – continuing the large short-squeeze – extended into ...

June Divergence and Reversal Lessons from Commodities Corn Wheat and Coffee
Thu, Jun 5, 6:11 PM ET, by Corey Rosenbloom

Recent swings and reversals in commodity markets give us an example to study lengthy divergences ...

Putting Things into Perspective with Monthly Market Charting
Thu, Jun 5, 1:51 PM ET, by Corey Rosenbloom

Intraday traders often get caught off-guard by surprise movement that defies the logic of their ...

June 5 Stimulus Short Squeeze Breakout and Stock Scan
Thu, Jun 5, 1:21 PM ET, by Corey Rosenbloom

Sellers can’t seem to stop this freight train of a bullish market in breakout mode. ...

Under Armour UA Breakouts and Reversals into June
Wed, Jun 4, 6:11 PM ET, by Corey Rosenbloom

Under Armor topped our stock scanning list this morning, and I wanted to expand on ...

  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 - 2014, 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 over 1000 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.