Grading the Performance of Volatility-Hedged ETFs

The video discusses volatility hedged ETFs, which aim to provide market exposure while minimizing losses during market downturns. Eric Dulcina from Bloomberg Intelligence explains the mechanics of these ETFs, highlighting the role of VIX futures and options. Specific products like PowerShares and VelocityShares are examined, showing how they performed during a recent market sell-off. The video compares different strategies, such as using VIX call options and long-short VIX futures, to balance downside protection with potential upside.

What is the primary goal of volatility hedged ETFs?

• To reduce steep market drops while maintaining exposure

• To eliminate all market risks

• To minimize market exposure

• To maximize short-term gains

How do volatility hedged ETFs typically manage risk?

• By using VIX futures and maintaining a mix of stocks and cash

• By avoiding any market exposure

• By investing solely in cash

• By focusing only on high-risk stocks

What is a trade-off when using volatility hedged ETFs?

• Increased short-term gains

• Complete elimination of market risks

• Higher long-term upside

• Giving up some long-term upside for reduced downside

Which ETF uses VIX call options to provide more long-term upside?

• PowerShares Downside Hedged ETF

• VXH

• TRSK

• VelocityShares Product

What strategy does the TRSK ETF employ to enhance returns?

• Investing only in S&P 500 stocks

• Using a long-short VIX futures strategy

• Focusing on emerging markets

• Holding a large cash reserve