The stock market gave a decent show in the first quarter of 2017 thanks to Trump trade, return to earnings growth, solid economic data, prospects of rate hike and improving global economic conditions. Notably, the S&P 500 and Dow Jones Industrial Average logged in gains for the sixth consecutive quarter, advancing 5.5% and 4.6%, respectively. The Nasdaq outperformed gaining 10%, marking the best quarterly performance since the end of 2013 (read: Best and Worst Zones of Q1 and Their ETFs).
The solid gains came despite a tough March when the euphoria over President Donald Trump evaporated especially following the collapse of the healthcare bill, his first major legislative move. A slew of upbeat data on consumer confidence, trade deficit, GDP, manufacturing, and inflation kept the buoyancy in the market alive.
Volatility acted as road blocks, but could not break the bullish trend. As a result, REX VolMAXX Short VIX Weekly Futures Strategy ETF topped the list of the best-performing ETFs of the first quarter, climbing 61.3%. The ETF seeks to gain when volatility falls.
VMIN in Focus
This ETF provides short exposure to the VIX Index by holding a combination of VIX futures contracts that are near to expiration. It does not seek to track the performance of the VIX Index or the S&P 500 and can be expected to perform very differently from the VIX Index over any time period. It targets a weighted average of time to expiry of the VIX futures contracts that is less than one month at all times (see: all the Inverse Volatility ETFs).
The actively managed product is unpopular an illiquid as depicted by its AUM of $11.1 million and average daily volume of under 8,000 shares.
State of Contango: A Win for VMIN
Investors should note that the ETF tracks the futures market and not the spot price of VIX. Therefore, it has to roll the contracts to maintain a notional exposure of time to expiration of less than one month. Hence, the fund is susceptible to roll yield.
Generally, roll yield is positive for the VIX index when the futures market is in backwardation and negative when the futures market is in contango. The VIX futures market is perpetually in a state of ‘contango’, a situation where near-term futures are cheaper than later-dated futures contracts. So, the index is selling low and buying high each time it rolls over its contract. This has led to the underperformance of the VIX futures index-based funds (read: The Key Things to Know When Trading Volatility with ETFs).
However, the case is opposite for VMIN. Since the ETF capitalizes on rolling short VIX futures contracts, it has benefited from the state of contango in the futures market.
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Inside the Best Performing ETF of the First Quarter
The stock market gave a decent show in the first quarter of 2017 thanks to Trump trade, return to earnings growth, solid economic data, prospects of rate hike and improving global economic conditions. Notably, the S&P 500 and Dow Jones Industrial Average logged in gains for the sixth consecutive quarter, advancing 5.5% and 4.6%, respectively. The Nasdaq outperformed gaining 10%, marking the best quarterly performance since the end of 2013 (read: Best and Worst Zones of Q1 and Their ETFs).
The solid gains came despite a tough March when the euphoria over President Donald Trump evaporated especially following the collapse of the healthcare bill, his first major legislative move. A slew of upbeat data on consumer confidence, trade deficit, GDP, manufacturing, and inflation kept the buoyancy in the market alive.
Volatility acted as road blocks, but could not break the bullish trend. As a result, REX VolMAXX Short VIX Weekly Futures Strategy ETF topped the list of the best-performing ETFs of the first quarter, climbing 61.3%. The ETF seeks to gain when volatility falls.
VMIN in Focus
This ETF provides short exposure to the VIX Index by holding a combination of VIX futures contracts that are near to expiration. It does not seek to track the performance of the VIX Index or the S&P 500 and can be expected to perform very differently from the VIX Index over any time period. It targets a weighted average of time to expiry of the VIX futures contracts that is less than one month at all times (see: all the Inverse Volatility ETFs).
The actively managed product is unpopular an illiquid as depicted by its AUM of $11.1 million and average daily volume of under 8,000 shares.
State of Contango: A Win for VMIN
Investors should note that the ETF tracks the futures market and not the spot price of VIX. Therefore, it has to roll the contracts to maintain a notional exposure of time to expiration of less than one month. Hence, the fund is susceptible to roll yield.
Generally, roll yield is positive for the VIX index when the futures market is in backwardation and negative when the futures market is in contango. The VIX futures market is perpetually in a state of ‘contango’, a situation where near-term futures are cheaper than later-dated futures contracts. So, the index is selling low and buying high each time it rolls over its contract. This has led to the underperformance of the VIX futures index-based funds (read: The Key Things to Know When Trading Volatility with ETFs).
However, the case is opposite for VMIN. Since the ETF capitalizes on rolling short VIX futures contracts, it has benefited from the state of contango in the futures market.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>