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

  • Other news: News from PR Newswire
| More

ZIV Undeservedly Neglected

Fri, Jan 20, 12:11 PM ET, by Bill Luby

Much to my amazement, next week will mark the third anniversary of the launch of the first two VIX ETPs: the S&P 500 VIX Short-Term Futures ETN (VXX) and the S&P 500 VIX Mid-Term Futures ETN (VXZ).

Some may recall that investors were slow to warm up to these ETNs (see Charting the Assets of Volatility-Based ETPs), but these two products are now #1 and #5 in the very successful volatility ETP space, with assets of $700 million and $188 million, respectively.

It is no secret that VXX has always been the darling of short-term traders, while VXZ has struggled at times to find a broad audience. As investors have become better educated about the influence of the VIX futures term structure and resulting roll yield on returns, interest in VXZ relative to VXX has picked up, but the latter, with its target maturity of five months, continues to play second fiddle to its short-term (one month target maturity) sibling.

I was curious see how this dynamic played out when VelocityShares rolled out two products that are essentially the inverse of VXX and VXZ in November 2010. Once again the short-term product captured the bulk of the interest of traders, as XIV quickly established itself as the #2 product in the VIX ETP space. While the love for XIV is certainly understandable, due to the history of persistent contango and negative roll yield in VIX futures, this product suffered a huge drawdown as the European sovereign debt crisis and resulting record backwardation wiped out 75% of the ETPs value from July through November.

Against this backdrop, I am frankly surprised by the lack of interest investors have shown in ZIV. In a nutshell, ZIV has many of the same benefits of long XIV and/or short VXX positions, with much less risk. Specifically, ZIV benefits from negative roll yield about 65% of the time, with VIX futures data going back to 2004 indicating that the annual benefit due to negative roll averages out at more than 25% per year. With XIV getting all the attention, I wonder if investors are aware that XIV is down and ZIV is up since the two products were launched.

Of course, like XIV, ZIV is exposed to sharp spikes in the VIX, as the chart below reflects. It is worth noting, however, that when the VIX spikes, ZIV can be expected to lose value at about half the rate of losses in XIV. For example, while XIV was falling 75%, ZIV was down 42%. Of course, with inverse volatility products, the potential for large short-term losses is significant, even though the long-term prospects are promising.

Finally, for those who are investing in or trading VIX-based ETPs, it is important to keep in mind that short-term returns are most likely to be a function of changes in the VIX and VIX futures, while long-run returns will be dominated by the VIX futures term structure.

Related posts:

[source(s): ETFreplay.com]

Disclosure(s): long XIV and ZIV, short VXX at time of writing



SDI Glossary: "Asset" Definition
SDI Glossary: "CBOE" Definition
SDI Glossary: "Exchange" Definition
SDI Glossary: "Futures" Definition
SDI Glossary: "Option" Definition
SDI Glossary: "Short" Definition
SDI Glossary: "VIX" Definition
SDI Glossary: "Yield" Definition
This Article's Word Cloud:   Assets   Based   Charting   ETNs   ETPs   Futures   November   Products   Term   VelocityShares   Volatility   about   benefits   course   down   from   futures   have   interest   inverse   investors   long   losses   maturity   million   negative   product   products   resulting   returns   roll   short   space   spikes   structure   target   term   that   these   this   time   traders   value   volatility   were   when   while   will   with   yield

| More

Fun Facts from 2014 About Up and Down Days in the Market
Thu, Oct 23, 4:11 PM ET, by Corey Rosenbloom

Like any year, 2014 has seen its share of ups and downs in the market ...

Stepping Inside Sector Strength During the October Rally
Thu, Oct 23, 1:41 PM ET, by Corey Rosenbloom

When we see large price movements in the market – like our recent strong rally ...

Join John Person's Trader Tools that are Working Right Now Webinar Thursday
Wed, Oct 22, 5:41 PM ET, by Corey Rosenbloom

I wanted to call your attention to a special live educational webinar taking place Thursday, ...

The Rectangle Range Continues for Apple AAPL Trade Planning
Wed, Oct 22, 11:21 AM ET, by Corey Rosenbloom

After a mini-bear trap, Apple (AAPL) shares continued trading within a well-defined Rectangle Range Pattern. ...

Updating the Best and Worst Days of 2014 for the SP500
Tue, Oct 21, 6:21 PM ET, by Corey Rosenbloom

Pop Quiz: Without peeking, can you identify which month had the best day for the ...

Up Up and Away Market Update and Stock Scan for Oct 21
Tue, Oct 21, 2:31 PM ET, by Corey Rosenbloom

Just like the prior times when buyers intervened to force a short-squeeze, we’re seeing the ...

Bouncing Range Market Update and Scan for Oct 20
Mon, Oct 20, 2:11 PM ET, by Corey Rosenbloom

With a narrow bounce continuing to drive the market into a known resistance cluster, let’s ...

Netflix NFLX Pushing into Gap after Big Drop
Mon, Oct 20, 12:31 PM ET, by Corey Rosenbloom

Netflix shares (NFLX) suffered a large news-based drop last week that took price all the ...

Join Me and 50 Other Speakers Live at the Las Vegas Traders Expo
Mon, Oct 20, 11:41 AM ET, by Corey Rosenbloom

Be our guest live at the rapidly approaching Las Vegas Traders Expo! The special event ...

Rally Report and Market Update for October 17
Fri, Oct 17, 2:21 PM ET, by Corey Rosenbloom

Price today continued its recovery rally into resistance (see this morning’s update for targets) and ...

Surging Toward the 200 day SMA Target
Fri, Oct 17, 12:31 PM ET, by Corey Rosenbloom

As was generally expected, the market retraced higher after several down-days in a row took ...

Join Me Saturday for a Day of Trader Education
Thu, Oct 16, 5:31 PM ET, by Corey Rosenbloom

Join us live for a day of trading education from Fibonacci to Price Patterns, Trend ...

Stabilizing Market Update and Stock Scan October 16
Thu, Oct 16, 2:41 PM ET, by Corey Rosenbloom

We’re putting the pieces back together from a broken market yesterday! An afternoon violent “V-Spike” ...

Stabalizing Market Update and Stock Scan October 16
Thu, Oct 16, 2:21 PM ET, by Corey Rosenbloom

We’re putting the pieces back together from a broken market yesterday! An afternoon violent “V-Spike” ...

Fear Poll: Fed/QE, Ebola and Technicals Top Worry List
Thu, Oct 16, 11:51 AM ET, by Bill Luby

Stocks may be in the process of putting in a bottom, but with the VIX ...

Comparing and Charting SP500 Volatility since Bear Market Bottom
Wed, Oct 15, 3:41 PM ET, by Corey Rosenbloom

How does current market volatility – which is surging – compare to the two prior ...

VIX and More Fear Poll
Wed, Oct 15, 2:41 PM ET, by Bill Luby

Which of the following makes you most fearful, anxious or uncertain about the stock market?. ...

Market Crashing Intraday Update for October 15
Wed, Oct 15, 1:51 PM ET, by Corey Rosenbloom

“This time, it’s different” and it is very different. When price failed to hold a ...

Support Bounce Market Update and Stock Scan for Oct 14
Tue, Oct 14, 2:21 PM ET, by Corey Rosenbloom

The question today remains “Will we see an actual bounce or will we see yet ...

Market Struggles Desperately to Rally off Weekly Target
Tue, Oct 14, 11:11 AM ET, by Corey Rosenbloom

After failing at two key support levels very recently, the S&P 500 and broader US ...

Largest SPX Pullback of 2014 Hits 6.4%
Mon, Oct 13, 1:51 PM ET, by Bill Luby

Every time there is a pullback, it seems as if I receive multiple requests for ...

New Lows into Support Market Update and Stock Scan Oct 13
Mon, Oct 13, 1:41 PM ET, by Corey Rosenbloom

At the halfway point today, we’re balancing the odds of another bullish reversal off support ...

Planning Another October Intraday Reversal from Positive Divergences
Mon, Oct 13, 1:11 PM ET, by Corey Rosenbloom

Let’s take a moment to view a “Big Three” Market Internal Chart of the S&P ...

Bounce or Breakdown Market Update for Oct 10
Fri, Oct 10, 3:11 PM ET, by Corey Rosenbloom

Price continues to trade within an intraday downtrend as the sell-phase continues. There’s a clear ...

Support Bounce or Breakdown Planning for the SP500 and Dow
Fri, Oct 10, 12:11 PM ET, by Corey Rosenbloom

Both the S&P 500 and Dow Jones Indexes are challenging major support levels that demand ...

Big Bear October 9 Market Update and Trending Stock Scan
Thu, Oct 9, 1:31 PM ET, by Corey Rosenbloom

One thing’s for sure – the market always keeps us on our toes! The intervention ...

Learn How to Trade Three Important Price Patterns - Thursday Webinar
Wed, Oct 8, 2:31 PM ET, by Corey Rosenbloom

I’m excited to be teaching a new webinar with TraderKingdom and ICE this Thursday, October ...

Key Divergences Suggesting Intraday SP500 Reversal
Wed, Oct 8, 1:41 PM ET, by Corey Rosenbloom

A quick look at our “Big Three Market Internal” Chart of the S&P 500 on ...

October 7 Stock Scanning and Market Update
Tue, Oct 7, 2:31 PM ET, by Corey Rosenbloom

Price continues its range between key boundary levels, making for relatively low volatility session into ...

Stalking an October Reversal Play in Bitcoin
Tue, Oct 7, 11:31 AM ET, by Corey Rosenbloom

Might Bitcoin be setting up a spike-reversal from an arc trendline pattern into support? There’s ...

October 6 Stock Scanning and Market Update
Mon, Oct 6, 2:51 PM ET, by Corey Rosenbloom

Today’s session has been a reversal range session between clear boundaries. Let’s start with our ...

Battle Between Repeating Pattern and Resistance for SP500
Mon, Oct 6, 11:41 AM ET, by Corey Rosenbloom

Will a consistent pattern repeat for the fourth time in 2014 (propelling the market to ...

Song for My Father*
Sat, Oct 4, 6:51 PM ET, by Bill Luby

My father passed away this summer and in the intervening period I set aside my ...

Join Corey Monday for a Panel Discussion Forecasting the SP500
Sat, Oct 4, 1:11 PM ET, by Corey Rosenbloom

I’m excited about a special opportunity Monday afternoon to join a panel and discuss the ...

Quick Fibonacci Retracement Guide for Current Market Levels
Fri, Oct 3, 3:41 PM ET, by Corey Rosenbloom

I wanted to provide a quick Fibonacci Retracement reference guide for short-term levels in the ...

Big Bullish Reversal Intraday Update and Stock Scan Oct 3
Fri, Oct 3, 3:21 PM ET, by Corey Rosenbloom

Finally the bulls made their strike – they were ready to pounce after a series ...

Compression Continues as Breakout Beckons in Apple AAPL
Thu, Oct 2, 4:21 PM ET, by Corey Rosenbloom

Apple shares (AAPL) continue their triangle or “EMA Compression” pattern as we await an official ...

October 2 VSpike Reversal Intraday Update and Scan
Thu, Oct 2, 2:31 PM ET, by Corey Rosenbloom

Retracement or V-Spike Reversal? So far, buyers aggressively defended the 1,930 index level and now ...

What Breadth Reveals about a Possible Market Reversal
Thu, Oct 2, 11:31 AM ET, by Corey Rosenbloom

When assessing the probability of a retracement (meaning the trend will continue) or larger reversal ...

Breakdown Intraday Update and Stock Scanning to Start October
Wed, Oct 1, 2:21 PM ET, by Corey Rosenbloom

Today certainly won’t be remembered as an ordinary, average day! At mid-day, stock prices are ...

Fast Fall for Ford Shares into Key Target
Tue, Sep 30, 11:11 AM ET, by Corey Rosenbloom

Ford shares (F) broke a critical support level and collapsed instantly toward the current key ...

Tight Range Compression Continues and Breakout Awaits for Chipotle CMG
Tue, Sep 30, 10:41 AM ET, by Corey Rosenbloom

For those awaiting a breakout in Chipotle shares (CMG), the wait may be coming to ...

Reversal Intraday Update and Stock Scan for Sept 29
Mon, Sep 29, 1:51 PM ET, by Corey Rosenbloom

New low? Reversal? Retracement? Let’s take a look at our intraday S&P 500 for today’s ...

Studying the Stealthily Strong Trender Disney DIS
Fri, Sep 26, 12:21 PM ET, by Corey Rosenbloom

You may not be aware that Disney (DIS) is one of the strongest trending stocks ...

EMA Compression Breakout Trade Forming in Chipotle CMG
Fri, Sep 26, 11:41 AM ET, by Corey Rosenbloom

Chipotle shares (CMG) are forming an “EMA Compression” trade set-up which is a specific type ...

Weekly Pullback Planning for SP500 and Dow Jones
Thu, Sep 25, 3:31 PM ET, by Corey Rosenbloom

Following up from the prior “Pullback Planning Update,” let’s take a quick look at the ...

Bearish Breadth and Price Collapse Stock Scan and Update for Sept 25
Thu, Sep 25, 2:11 PM ET, by Corey Rosenbloom

Look out below! Price broke support and collapsed in a liquidation event today where the ...

Bouncing Market Update and Trending Stock Scan for Sept 24
Wed, Sep 24, 2:11 PM ET, by Corey Rosenbloom

Right on schedule, price rallied up from a known support target level and we have ...

Support Range Bouncing for the SP500
Wed, Sep 24, 12:11 PM ET, by Corey Rosenbloom

Despite the lengthy uptrend, the shorter-term S&P 500 has devolved into a sideways trading range ...

Creeper Trend Continues Intraday Update and Stock Scan Sept 23
Tue, Sep 23, 3:11 PM ET, by Corey Rosenbloom

Here we go again! The market continued its slide lower – as was widely expected ...

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

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

ZIV Undeservedly Neglected | 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.