December 11, 2011 – ETF Expert Radio Podcast | Main | Currency ETFs Show More Fear, While Volatility ETNs Show Less

Volatility ETNs During The Holiday Season

13 December 2011 at 11:27 am by Staff     Bookmark and Share    Follow EtfExpert on Twitter

The 10-year treasury yield is back below 2%. The U.S. Dollar is surging as a safe haven currency. And U.S. stocks in the S&P 500 have dropped nearly -5% from recent highs.

In spite of the “risk-off” indications, the CBOE Volatility Index (VIX) has been showing lower levels of implied volatility. How can that be?

In his commentary below, Bill Luby explains that December serves up a ”holiday effect.” Historically, there’s nearly a 50-50 chance that volatility via the VIX may hit an annual low in the last calendar month.

If the VIX slumbers as it approaches Christmas, some of it may be attributable to the fact that there are fewer trading days in holiday-oriented months. Some of it may be attributable to the tendency for bullish movement in stocks in December and January. (Think ”Santa Claus rally” and the “January effect.”)

On the other hand, there may be a different explanation for lower volatility in the current calendar year. Perhaps the investment community is growing more accustomed to erratic price swings; that is, while the micro- and macro-economic positives (e.g., record corporate profits, China loosening monetary/fiscal policy, etc.) may not be enough to overcome the severity of the mess in Europe, there’s just enough upbeat data points to keep value hunters on the look-out.

If you’re not “buying” any of it… if you believe that the Euro-zone debt crisis will erupt yet again in 2011… you could purchase the iPath S&P 500 Short-Term VIX Futures (VXX). This exchange-traded note would really pop if the sleeping volatility giant decided to wake.

 December Is The Cruelest Month… For The VIX– Bill Luby, VIX And More
Best ETF For 2012: Vanguard MSCI Emerging Markets– Alex Dumortier, Motley Fool
ETF Ideas: The 3 Best Countries To Invest In Now – Greg Group, Seeking Alpha
One Year Later: The Other Precious Metals ETF (WITE )– Stoyan Bojinov, ETFdb
ETFs That Are New, But Not Improved – Ian Salisbury, Smart Money

 

 

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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