15 Most Volatile ETFs

March 01, 2016

It's no secret that volatility is dropping like a rock. The S&P 500 has gone almost 100 trading sessions without a decline of 1% or more, and it hasn't had any move of 1%―either up or down―in more than 50 sessions.

With the waters so calm, it's unsurprising that the CBOE Volatility Index fell below 10 for the first time in almost a decade earlier this month. The VIX, as it's called for short, attempts to measure expected volatility based on the pricing of S&P 500 options. When investors are willing to pay more for options, they expect larger moves in the market (and vice versa). This is called "implied volatility."

Currently, the VIX is trading around 12. It's ticked up a bit as investors buy up options to hedge against a potential market pullback. The VIX is an annualized figure; thus, based on where the volatility index is trading right now, traders expect the S&P 500 to move 12% up or down in the next year.

CBOE Volatility Index

A reading of 12 for the VIX is well below its long-term average of 19.6, but significantly above the actual, observed volatility so far this year. For example, daily volatility during the past month for the SPDR S&P 500 ETF (SPY) was a mere 5.3 (annualized). Historical volatility in any given month rarely gets below that level.

Even on a longer-term basis, volatility is slipping. The rolling one-year volatility for SPY is 10.8. A reading below 10 for this measure is extremely rare (and explains why the VIX scarcely falls below 10).

 

Rolling 1-Month & 1-Year Volatility For SPY

Source: Bloomberg

Volatile ETFs Abound

With all measures of stock market volatility constrained, trading opportunities in broad-market funds such as SPY have been limited so far in 2017. But that doesn't mean all ETFs have been as well-behaved.

There are still plenty of products on the market that have given investors rollercoasterlike performance. The most-volatile ETFs, for example, all have annualized volatilities north of 100. These products are almost exclusively leveraged, usually offering traders 2x or 3x the returns of an underlying index.

The Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) and the Direxion Daily Junior Gold Miners Index Bear 3x Shares (JDST) are the two most volatile exchange-traded funds of all. Each has a one-year volatility reading of about 170.

The VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the ProShares Ultra VIX Short-Term ETN (UVXY) and the Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X Shares (DRIP) are a few others to make the most volatile list.

All of these products are designed for quick trades. Holding them too long can result in poor performance due to the performance drag of daily rebalancing.

 

Wild Swings In Unleveraged Products, Too

Of course, leveraged ETFs aren't the only products more volatile than SPY. There are also plenty of unleveraged products that have seen much higher volatility than the broad U.S. stock market, such as the iPath Global Carbon ETN (GRN). Its one-year volatility reading of 97.7 means it's been almost 10 times as volatile as the S&P 500. GRN is a thinly traded ETN that tracks the global carbon credit market.

Meanwhile, the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) and the ProShares Short VIX-Short-Term Futures ETF (SVXY) are two other products for which wild swings are the norm. One-year volatility for the pair is currently north of 60.

The two have ample liquidity and a combined $1 billion in assets, making them well-suited for traders looking to make quick bets on volatility. Incidentally, these are among the best-performing products of the year, as betting against the VIX has paid off handsomely.

Related volatility products that provide long exposure to the VIX are also on the most volatile list. The VelocityShares Daily Long VIX Short-Term ETN (VIIX), the ProShares VIX Short-Term Futures ETF (VIXY) and the iPath S&P 500 VIX Short-Term Futures ETN (VXX) each have one-year volatility readings above 58.

Outside of volatility products, ETFs tracking gold miners and energy producers are among the most volatile in the market. The VanEck Vectors Junior Gold Miners ETF (GDXJ), the PureFunds ISE Junior Silver ETF (SILJ) and the iPath Bloomberg Energy Subindex Total Return ETFN (JJE) all have one-year volatility readings in the 47-57 range.

For a complete list of the most volatile ETFs, see the tables below:

 

Top 15 Most Volatile ETFs (including leveraged)

Ticker Fund 1-Year Volatility (%)
JDST  Direxion Daily Junior Gold Miners Index Bear 3X Shares 170.41
JNUG  Direxion Daily Junior Gold Miners Index Bull 3X Shares 169.05
NUGT Direxion Daily Gold Miners Index Bull 3x Shares 141.36
DGAZ  VelocityShares 3X Inverse Natural Gas ETN 127.78
GASX  Direxion Daily Natural Gas Related Bear 3x Shares 119.36
UVXY  ProShares Ultra VIX Short-Term Futures ETF 114.86
TVIX  VelocityShares Daily 2x VIX Short-Term ETN 111.56
GDJJ  ProShares Ultra Junior Miners 109.74
DRIP Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares 109.54
LABD  Direxion Daily S&P Biotech Bear 3X Shares 108.84
BRZU Direxion Daily Brazil Bull 3X Shares 108.47
LABU  Direxion Daily S&P Biotech Bull 3X Shares 105.21
DYY  DB Commodity Double Long ETN 100.86
GRN  iPath Global Carbon ETN 97.74
GDXX  ProShares Ultra Gold Miners 94.05

 

Top 15 Most Volatile ETFs (excluding leveraged)

Ticker Fund 1-Year Volatility (%)
GRN  iPath Global Carbon ETN 97.74
GAZ  iPath Bloomberg Natural Gas Subindex Total Return ETN 75.12
XIV  VelocityShares Daily Inverse VIX Short-Term ETN 63.45
SVXY  ProShares Short VIX Short-Term Futures ETF 62.92
GOEX  Global X Gold Explorers ETF 59.33
VIIX  VelocityShares Daily Long VIX Short-Term ETN 58.48
VIXY  ProShares VIX Short-Term Futures ETF 58.46
VXX iPath S&P 500 VIX Short-Term Futures ETN 58.22
GDXJ VanEck Vectors Junior Gold Miners ETF 56.97
SILJ  PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF 56.5
SGDJ  Sprott Junior Gold Miners ETF 54.99
SLVP  iShares MSCI Global Silver Miners ETF 48.84
SIL  Global X Silver Miners ETF 48.75
JJE  iPath Bloomberg Energy Subindex Total Return ETN 47.46
RING iShares MSCI Global Gold Miners ETF 47.36

 

Contact Sumit Roy at [email protected].

 

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