On Thursday, JP Morgan Chase announced that the Inverse VIX Short-Term Futures ETNs due March 22, 2045 is trading on the NYSE Arca.
This ETN looks to provide similar returns to that of the S&P 500 Vix Short-Term Futures Points-Change Inverse Daily Index. VYLD operates with a net expense ratio of 85 basis points.
This index aims to provide returns based on the performance of VIX futures contracts. It does so through short exposure to both front- and second-month VIX futures contracts.
VIX futures contracts are based on the Cboe Volatility Index. The Cboe Volatility Index is used to measure the volatility of large-cap U.S. equities over the 30 days.
The S&P 500 index looks to follow the daily movements of these futures contracts. In doing so, the index creates “points-change” return potential.
Advantages of Volatility
Due to its focus on volatility, the fund can see its performance increase in two different ways. One is if the underlying future contracts see a decrease in price. Alternatively, the index can also do well if the price of the second-month futures contract outpaces the front-month futures contract price.
For investors betting on volatility persisting in the near term, this ETN can be an ideal means to capitalize. Many advisors and investors remain wary of where the large-cap market may be heading, potentially creating opportunity for VYLD.
That said, betting on volatility can expose investors to significant risk. Thus, this ETN may be best used by investors with a high degree of knowledge on market movements and the consequences of volatility.
VYLD is the latest investment offering to join JP Morgan’s extensive library of market strategies. Within JP Morgan’s extensive offering is a wide selection of exchange-traded funds.
JP Morgan’s ETF roster alone accounts for over $190 billion in assets under management. One of the largest JP Morgan funds, the JPMorgan Ultra-Short Income ETF (JPST ), has well over $31 billion in AUM.
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