This Fund Gained Almost 85% So Far This Year - The Best Volatility ETFs Of 2023

After a shaky 2022 that saw the S&P 500 (INDEX: .INX) lose almost 20%, the first half of 2023 has seen a strong reversal with a more than 16% gain. 

Accompanying this rise has been the steady decline of market volatility. Volatility, often measured by the CBOE Volatility Index VIX, is typically inversely related to the general direction of the stock market and is down 29.91% YTD.

VIX, in essence, measures the sentiment of investors and is often called the “fear index”. As stocks rise, investors are more confident, as prices fall investors are more fearful.

The largest spikes in VIX, by a mile, came at the height of the 2008 financial crisis and again during the spring of 2020 as the world shut down in response to the Covid-19 Pandemic. 

Although VIX is widely used, some fundamental flaws in its calculation have led to the creation of an alternative volatility index that is gaining in popularity. The MIAX SPIKES Volatility Index SPIKE offers several advantages, including using live pricing data (vs an average calculation) and updating every 100 milliseconds (vs every 15 seconds).

These indexes cannot be traded directly, a number of products such as Exchange Traded Funds (ETFs) offer investors exposure. This allows investors to express a view of the general sentiment of the market.

The following are the best performing Volatility ETFs since January 1st of this year. Given the steady decline in volatility, all 3 are inverse ETFs, that is, ETFs whose performance is inversely related to that of the underlying asset. Only ETFs with Assets Under Management (AUM) of greater than $50 million were considered.

-1x Short VIX Futures ETF SVIX

• Up 84.69% YTD
• Tied to the Short VIX Futures Index
• $80.7 million in AUM
• Expense ratio of 1.47%
• 3 month average daily trading volume of 1,814,276

ProShares Short VIX Short-Term Futures ETF SVXY

• Up 42.93%
• Seeks to return ½ of the inverse of the VIX Short-Term Futures Index
• $259.7 million in AUM
• Expense ratio of .95%
• 3 month average daily trading volume of 1,922,784

Simplify Volatility Premium ETF SVOL

• Up 4.11%
• Seeks to return 0.2x to 0.3x of the inverse of the VIX Short-Term Futures Index
• $358.4 million in AUM
• Expense ratio of .5%
• 3 month average daily trading volume of 275,539

Featured photo by Sigmund on Unsplash