The Six Figure Investing 2013 Volatility Awards

Even though the CBOE’s VIX® only managed an intraday high of 21.91 during all of 2013 there were still plenty of volatility accomplishments to be recognized.  

  1. Best performance by a Volatility Exchange Traded Product (ETP)
    • VelocityShares’ XIV and ProShares’ SVXY short term inverse volatility funds both had great 2013s, but XIV took the top spot with an annual gain of 107.23% vs SVXY’s 106.17%.   Before investing in these products be aware that holding these products requires a strong stomach—they had drawdowns of -18.9%, -20.4%, -21.4%, and -28.7% during 2013.  Imagine what a rough year in the market would be like…   Where did I put my Peril Sensitive Sunglasses?
  2. Worst performance by a Volatility ETP
    • Another close one, with VelocityShares’ TVIX and ProShares’ UVXY  duking it out in the 2X Short term Volatility category.  Incredibly they ended the year in a tie, both down -91.97%.
  3. Most asset growth in a new volatility ETP
    • Although strictly not new in 2013 (it started trading 6-December-2012),  I wanted to honor PowerShares’ PHDG for its fast start—ending 2013 with $105 million in assets under management
  4. Highest percentage asset growth in an existing volatility fund
    • VelocityShares’ ZIV medium term inverse volatility ETN with asset growth of 310%  ($16 million to $65 million).  It turned in a yearly price growth of 62.8% with a worst case drawdown of -18%.
  5. The “Destroyer of Worlds” special award
    • Goes to perennial winner, Barclays’ VXX with an estimated $1.1 billion in shareholder value contango’d out of existence in 2013.  My guess is that some individuals within Barclays received hefty Christmas bonuses for imperfectly hedging this product (see How does VXX work).
  6. Best reverse split
    • Four funds, TVIX, UVXY, VXX, and Citigroup’s CVOL were eligible this year.  The award goes to TVIX’s issuer Credit Suisse for not waiting until TVIX broke the buck to reverse split this time—achieving TVIX prices that were actually higher than the VIX for a time.
  7. The “Build on Strength” award
    • The winner is the CBOE, who extended the trading hours of its flagship VIX futures by over 5 hours in 2013,  achieving a complete time overlap with both the European and New York equity markets and facilitating the tricky rebalancing  ETFs issuers have to do based on “day end” VIX futures settlement values.  The daily volume of VIX futures dwarfs the volume of all other volatility futures combined.
    • In addition the CBOE also introduced a new short term (9 day) index VXST, based on the VIX methodology that lays the foundation for new shorter duration VIX futures.
  8. Best volatility term structure graphs
    • No contest here.  VIX Central is the only game in town.  Recent improvements include polynomial fits for graphs and adding a graphical comparison of today’s VIX futures term structure vs. the CBOE’s VIX constant maturity indexes (go to the “Historical Prices”  and click on the “Snapshot” link in the box on the far right).
  9. Best free volatility Greeks
    • Fidelity’s Active Trader Pro takes the honors here.  A recently update brought us VIX option delta and gamma values that actually use the appropriate VIX futures as the underlying.  Kudos to them.  The rest of the field delivers volatility Greeks that are incorrectly based on the VIX.
  10. The “Taking on Goliath” award
    • Nations®’ VolDex®  index is competing with the CBOE’s VIX using a proprietary approach that it claims will be easier to hedge than the VIX. They are picking a fight with the biggest kid in the room…
  11. The “Mind Bending Product” award
    • Unfortunately there were no qualified entrants this year.  The most recent possibility, CBOE’s Variance futures were introduced in 2012.

For a complete list of the USA based volatility funds see Volatility Tickers.

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2 thoughts on “The Six Figure Investing 2013 Volatility Awards”

  1. That $1.1 billion didn’t get contango’d out of existence. Every dollar of it ended up in someone else’s pocket. I know, because it was indirectly on the receiving end this year. My 2013 XIRR on my volatility portfolio was 172% (including cash held), mostly accomplished using rolling long ATM puts on UVXY and VXX at various maturities. It’s been a very good year.

    • Hi Andrew, In the broadest sense of the word “existence” I agree with you–at least for VIX futures because they are a zero sum game–unlike stock equity. But my point was that VXX losses were primarily due to contango this year–and those asset decreases were big.

      Congratulations on a great year trading.

      — Vance


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