Checking Up On the VIX-Product Rookies

Examining the early performance of the AccuShares Spot CBOE VIX Fund Up Shares (VXUP) and AccuShares Spot CBOE VIX Fund Down Shares (VXDN)

by Adam Warner

Published on May 29, 2015 at 9:32 AM
Updated on May 29, 2015 at 9:35 AM

It's a week and a half or so into the life of AccuShares Spot CBOE VIX Fund Up Shares (VXUP) and AccuShares Spot CBOE VIX Fund Down Shares (VXDN), so it's high time to make some snap judgments!

And the verdict? They move a lot more like futures than "spot" so far. Just to review

"The Up Share will benefit from increases in the Underlying Index and will be adversely impacted by decreases in the Underlying Index and by the Daily Amount, if any - the Down Class Share will benefit from decreases in the Underlying Index and the Daily Amount, if any and will be adversely effected by increases in the Underlying Index (both share classes subject to a maximum of 90% in either direction). The benefit to the Up Share Class is equal to the adverse impact to the Down Share Class and vice versa. Both share classes will have proportionate entitlements to Eligible Investments and any earnings thereon (as described below). Investors must choose either the Up or the Down Shares based on their individual opinion of the future direction of the Underlying Index."

But alas, it's not so simple as gaming your CBOE Volatility Index (VIX) opinion. There's an accumulated distribution that goes to the "winning" side, payable on the 15th of each month. And that distribution date appears to serve as a de facto expiration date.

Heres a five-day slice of VXUP vs. VIX. It covers the volatility drift into the long weekend, the "pop" upon the return from the holiday and an ugly Tuesday market, and then the drop in volatility on the Wednesday rally.

  150529Warner1

It was an interesting few days in VIX, but not so much in VXUP. On the other hand, here's VXUP vs. the iPath S&P 500 VIX Short-Term Futures ETN (VXX) over that same time frame.

150529Warner2

It's not exact, but it's certainly a much closer relationship. The best description is that it's a more muted version of VXX, which I suppose has value if that persists, as it suggests it won't decline as much as VXX over time.

But that may not hold, as they're not the same thing. VXX tracks a rolling 30-day VIX future, whereas VXUP thus far trades like a future that's going to expire in the middle of the next month. So these two will presumably start to diverge soon, as well.

Again, it's very early. We don't know that this behavior will persist over the long haul. In fact, it probably won't. Right now, VXUP and VXDN are like futures with about 20 days to go. Soon they'll be like futures with two weeks, then one week, then … OK, you get the idea. As it gets closer to the 15th, they should move more with VIX itself -- right about until the distribution, at which point they will probably become VXX and inverse VXX replicas.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.
Wall Street Roars Higher Amid Civil Unrest
Investors weighed a mixed bag of jobs data
AstraZeneca Stock Flat Despite COVID-19 Vaccine News
AstraZeneca saw a rise in capacity for its COVID-19 vaccine candidate
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.