This ETN offers a way to establish inverse exposure to an index comprised of volatility futures, potentially profiting from some of the structural issues that result in poor long-term performance among many of the products in the Volatility ETFdb Category. This ETP may be appealing to some as part of a long-term portfolio given the potential for capital appreciation and some diversification benefits as well. But it should be noted that because the VIX often experiences big swings, this product can also exhibit significant short-term volatility.

This ETN offers a way to establish inverse exposure to an index comprised of volatility futures, potentially profiting from some of the structural issues that result in poor long-term performance among many of the products in the Volatility ETFdb Category. This ETP may be appealing to some as part of a long-term portfolio given the potential for capital appreciation and some diversification benefits as well. But it should be noted that because the VIX often experiences big swings, this product can also exhibit significant short-term volatility.

XXV is an ETN, meaning that investors are exposed to the credit risk of the issuing bank but don’t have to worry about the impact of tracking error on returns. Also note that XXV is linked to an index comprised of VIX futures, and as such this product won’t necessarily reflect movements in the spot VIX. Because significant contango often exists in VIX futures markets, there can be significant gaps between changes in the spot price and returns available through a futures based strategy (such as the one implemented by the index underlying this product). XXV is actually constructed to exploit the contango in VIX futures markets, delivering short exposure to an index that often sees significant return erosion as a result of the monthly roll process. Volatility is a complex asset class, and XXV is a somewhat complicated product. Those who don’t fully grasp the investment thesis behind this product should likely stay away.

There are several products that offer inverse exposure to VIX indexes, but these ETPs are far from identical. XIV resets exposure on a daily basis, while both XXV and IVO seek to offer inverse exposure over the life of the notes. But these periods are different, and as such the participation between these two products can vary significantly. Be sure to consider the participation metric of both XXV and IVO before establishing a position (and be sure to have a firm grasp on what this number means about the potential returns and risks).