Portfolio Applications For VIX-Based Instruments

October 26, 2011

Disclosures
Past performance or results should not be taken as an indication or guarantee of future performance or results, and no representation or warranty, express or implied, is made regarding future performance or results. The information contained in this document does not constitute an offer to sell, or a solicitation of an offer to purchase, any security, future or other financial instrument or product. Investors should review the prospectus or offering document for any security, financial instrument or product and make their own investment decisions based on their specific investment objectives and financial position and after consulting independent tax, accounting, legal and financial advisors. The information contained herein (including historical prices or values) has been obtained from sources that VelocityShares LLC and VLS Securities LLC (together, “VelocityShares”) consider to be reliable; however, VelocityShares does not make any representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein.

VelocityShares” and the VelocityShares logo are registered trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.

“Standard & Poor’s®”, “S&P®”, “S&P 500®”, “Standard & Poor’s 500™”, “S&P 500 VIX Short-Term Futures™ ER” and “S&P 500 VIX Mid-Term Futures™ ER” are trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and have been licensed for use by VelocityShares LLC, and VLS Securities LLC.

“VIX” is a trademark of the Chicago Board Options Exchange, Incorporated (“CBOE”) and has been licensed for use by S&P. S&P does not sponsor, promote, or sell any product based on the Index and neither S&P nor CBOE make any representation herein regarding the advisability of investing in any product based on the Index.

Endnotes

  1. http://www.cboe.com/micro/VIX/vixwhite.pdf
  2. Monthly rebalance to target portfolio weights
  3. “The Dynamics of Leveraged and Inverse Exchange-Traded Funds,” Cheng and Madhavan, 2009
  4. Short volatility-hedged strategy represents the returns of a portfolio containing 90 percent -1x SPVXSP and 10 percent 2x SPVXSP for the period December 2005-August 2011.The portfolio is rebalanced on a quarterly basis with an equal percentage of the portfolio being rebalanced on each trading day of the quarter.
  5. Tail risk strategy represents the returns of a portfolio containing 67 percent -1x SPVXSP and 33 percent 2x SPVXSP for the period December 2005-August 2011.The portfolio is rebalanced on a quarterly basis with an equal percentage of the portfolio being rebalanced on each trading day of the quarter.
  6. Long-short volatility mid-term represents the returns of a portfolio containing 55 percent -1x SPVXSP and 45 percent 2x SPVXMP for the period December 2005-August 2011. The portfolio is rebalanced on a quarterly basis with an equal percentage of the portfolio being rebalanced on each trading day of the quarter.
  7. Illustrates the theoretical returns of a portfolio with a long exposure to an inverse index and a long exposure to a leveraged index for the period December 2005-August 2011. The percentage exposure to each index depends on the strategy. The portfolio is rebalanced on a quarterly basis with an equal percentage of the portfolio being rebalanced on each trading day of the quarter.
  8. Long/short volatility strategy short-term represents the returns of a portfolio containing 55 percent -1x SPVXSP and 45 percent 2x SPVXSP for the period December 2005-August 2011. The portfolio is rebalanced on a quarterly basis with an equal percentage of the portfolio being rebalanced on each trading day of the quarter.

 

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