SVXY and UVXY To Be Re-Purposed Feb 28

Another big news item dropped in the volatility ETP world today. This one from ProShares, who is reducing target exposure for SVXY and UVXY.

Effective 2/28/18:

$SVXY will be a -0.5x volatility fund (previously -1x)

$UVXY will be a 1.5x volatility fund (previously 2x)

This is a similar move to what VMIN & VMAX announced earlier Monday. But while VMIN/VMAX kept their exposure at 1x and moved the duration of VIX futures out ~60 days, SVXY is just reducing its daily movement by half.

As I mentioned in my other post today, this is a more sensible way for a short volatility play. My main gripe is that SVXY went all the way down to -0.5x instead of something like -0.75. The reduced daily movement makes SVXY less attractive as the short vol ETP of choice, but it's nice that you can still buy options against it.

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ProShare Capital Management LLC Plans to Reduce Target Exposure On Two ETFs

Bethesda, MD (February 26, 2018) – ProShare Capital Management today announced that the investment objective of two of its ETFs will change effective as of close of business on February 27, 2018.

ProShares Ultra VIX Short-Term Futures ETF (NYSE Arca: UVXY) will change its investment objective to seek results (before fees and expenses) that correspond to one and one-half times (1.5x) the performance of the S&P 500 VIX Short-Term Futures Index ("Index") for a single day. The Fund's investment objective currently is to seek results (before fees and expenses) that correspond to two times (2x) the performance of the Index for a single day. If the Fund were successful in meeting its new objective, on a day the Index rose 1%, the Fund should rise approximately 1.5%, before fees and expenses. Similarly, on a day the Index fell 1%, the Fund should fall approximately 1.5%, before fees and expenses.

ProShares Short VIX Short-Term Futures ETF (NYSE Arca: SVXY) will change its investment objective to seek results (before fees and expenses) that correspond to one-half the inverse (-0.5x) of the Index for a single day. The Fund's investment objective currently is to seek results (before fees and expenses) that correspond to the inverse (-1x) of the Index for a single day. If the Fund were successful in meeting its new objective, on a day the Index fell 1%, the Fund should rise approximately 0.5%, before fees and expenses. Similarly, on a day the Index rose 1%, the Fund should fall approximately 0.5%, before fees and expenses.

Certain regulatory approvals will be required for the Funds to permanently pursue these new investment objectives. In the event that such approvals are not obtained, the Funds will consider other courses of action.

Pair of Volatility Funds to Be Re-Launched

We received huge news from REX Shares this morning, announcing that they are updating the objective of their VMIN & VMAX volatility pair. This looks like a really interesting, and much more sensible, play on volatility.

They are moving away from high-beta volatility ETFs (which are a high risk for termination when volatility spikes too much) to a product that trades on a daily basis somewhere between XIV and ZIV. The result should be a new VMIN fund that is less "boring" in movement as ZIV but also carry a fraction of the risk of a fund blow up and large drawdowns that were seen with XIV.

Announcement below, with emphasis added.

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The REX VolMAXX Long VIX Weekly Futures Strategy ETF (VMAX) and the REX VolMAXX Short VIX Weekly Futures Strategy ETF (VMIN) have filed supplemental registration statements that revise their stated Principal Investment Strategies. The Funds expect to invest primarily in VIX Futures Contracts with two to six months to expiration, rather than VIX Futures Contracts with less than one month to expiration as was previously the case.  Beginning on March 7, 2018, the Funds anticipate that they may begin investing in VIX Futures Contracts with greater than one month to expiration, and the Funds may therefore have exposure to VIX Futures Contracts with a weighted average time that is greater than, and which could be substantially greater than, one month.  Additionally, effective on or about April 25, 2018, the name of VMAX will change to “REX VolMAXX^TM Long VIX Futures Strategy ETF”, and the name of VMIN will change to “REX VolMAXX^TM Short VIX Futures Strategy ETF.”

Historically, the amount by which movements in the VIX Index¹ have impacted the price of a VIX futures contract, also referred to as “beta,” has increased as a contract is closer to maturity.² By increasing the weighted average of time to expiry of the VIX Futures Contracts held by the Funds, it is possible, and indeed likely, that the Funds’ “beta” to the VIX Index will decrease. Additionally, because the margin requirements for longer-dated VIX Futures Contracts tend to be lower than the margin requirements for shorter-dated VIX Futures Contracts,³ REX anticipates that this revision to the Principal Investment Strategy will allow the Funds to reduce their exposure to Underlying Funds and ETNs.⁴

The supplemental registration statements, information about the Funds’ holdings and additional information about the Funds can be found at https://www.volmaxx.com/