O'Reilly logo

Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange-Traded Notes by Russell Rhoads

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 6

Volatility-Related Exchange-Traded Notes

The iShares division of Barclays Bank introduced VIX-related exchange-traded notes in early 2009. One product was based on exposure to shorter-term VIX futures, with the other targeting performance of intermediate-term VIX futures contracts. Before jumping into the specifics of these two products, we offer a quick note on what exchange-traded notes are and how they differ from exchange-traded funds. After covering the specifics of both the iShares ETNs, there is a quick comparison of the two as well as a look at how they perform relative to the S&P 500 index.

In addition, there are other publicly exchange-traded securities basing performance off of the VIX. First, Barclays also has introduced an inverse ETF based on the same index as one of its ETN products. Also, there is a VIX-based exchange-traded fund listed on the London Stock Exchange, but it trades in dollars.

WHAT ARE EXCHANGE-TRADED NOTES?

An exchange-traded note (ETN) is a debt security that is backed by the credit rating of the issuer. The goal of an ETN is to replicate an investment strategy or performance of another investment vehicle. Exchange-traded notes trade in the same manner at exchange-traded funds (ETF) but have a slightly different structure. Again, ETNs are debt securities that attempt to replicate a market index or particular strategy. Barclays Bank has issued a variety of ETN products that replicate anything from investing in commodity products to the ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required