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How to hedge volatility with ETFs

Janus Velocity Volatility Hedged Large Cap ETF SPXH

This ETF tracks the VelocityShares Volatility Hedged Large Cap Index and looks to hedge “volatility risk” in the S&P 500. It offers investors exposure to not only the S&P 500 but also both long and inverse exposure in short-term VIX futures. The product provides target equity exposure of 85% to the S&P 500 using large-cap ETFs, while the remaining 15% goes to the volatility strategy through one or more swaps. The fund has $63.9 million in AUM and charges 70 bps in annual fees. It trades in small volumes of 6,000 shares a day on average.


This is an ETN option tracking the S&P 500 Dynamic VEQTOR Index. VQT uses volatility futures contracts directly to hedge volatility. It increases allocation to the equity component as measured by the S&P 500 Total Return Index in times of low volatility. On the other hand, it increases volatility exposure as measured by the S&P 500 VIX Futures Total Return index and allocates entirely into cash if the index slumps 2% or more in the preceding five days. In this manner, the note manages to keep a check on volatility. The product has amassed $25.7 million in AUM and charges higher 95 bps in annual fees. The ETN sees paltry average daily volume of 4,000 shares.

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